Last week, the average prime lending rate, a key indicator influencing various loan rates from small businesses to mortgages, reached a two-year low at 10.41 percent, marking a significant drop from its peak of 29.67 percent in November 2022. This downward trend reflects a broader reduction in market lending rates and government securities yields over the past 10 months, initiated when the Central Bank began cutting rates in June the previous year. Despite concerns about excessive liquidity in the real economy, the recent 50 basis points reduction in key policy rates by the Central Bank aims to stimulate credit flow and support economic recovery. This shift towards lower lending rates is expected to fuel borrowing for consumption, growth, and investment, potentially boosting incomes and restoring purchasing power lost during the inflationary pressures of 2022 and 2023. Sri Lanka anticipates entering a robust credit cycle, with banks likely to disburse record amounts of credit in the upcoming months, setting the stage for accelerated economic activity and improved financial stability.

Market lending rate falls to two-year low as economy readies to take off | Daily Mirror