In the first half of 2024, Sri Lanka's finance companies increased their investments in gove ment securities, repos, and unit trusts as car imports remained banned due to foreign exchange shortages caused by past inflationary rate cuts, according to official data.

A report by the central bank noted that improving economic conditions and lower interest rates have spurred demand for credit, even though key areas like vehicle leasing continue to face challenges. Following a credit contraction in 2023, loans and advances in the finance sector grew by 11.4%, reaching 1,359 billion rupees by mid-2024. Total investments expanded at a faster pace of 22.6%, amounting to 401.7 billion rupees by the end of the second quarter, with 39.8% allocated to gove ment securities.

Finance companies showed increased interest in unit trusts, rising from 1.6% to 5.9% of total investments, and repos, which grew from 9.3% to 15%. The central bank did not clarify if these investments were directly linked to gove ment securities.

Sri Lanka is expected to resume car imports in 2025, reversing a ban on over 3,000 items imposed during the 2020 rate cuts, which were supported by large-scale money injections.