By Roy Denish
Official economic data from the Central Bank of Sri Lanka has revealed a sharp increase in short-term borrowing, with citizens pawning approximately Rs. 211.9 billion worth of gold within the first six months of the year. The figures, which were recently highlighted by Opposition Leader Sajith Premadasa, underscore the financial strain still experienced by households across the island despite broader macroeconomic stabilization efforts.
According to the data, gold-backed lending surged by Rs. 211.9 billion during the first half of the year, accounting for nearly half of the total Rs. 443.5 billion expansion in personal loans for the period. Pawning now represents 9.9 percent of total commercial bank lending, an increase from 8.9 percent at the close of the previous year. Total outstanding pawning advances have climbed past Rs. 1.11 trillion, cementing its position as the third-largest lending sub-sector in the country after construction and wholesale or retail trade.
While gold-backed credit provides commercial banks with secure and low-risk portfolios, economists note that a heavy reliance on liquidating family assets or personal gold reserves typically signals persistent liquidity crunches among middle- and low-income demographics. Addressing the situation, political leaders and critics have pointed to these figures as a clear barometer of household distress. Opposition figures have urged the administration to implement structured microfinance debt relief programs and stricter regulatory oversight on informal, high-interest lending channels to protect vulnerable demographics, particularly low-income households and women, from compounding debt cycles.
Although macro-level indicators such as foreign remittances, tourism revenue, and national reserves have shown robust recovery following the country’s severe financial crisis, the heavy reliance on asset-backed borrowing highlights a persistent gap between national economic recovery metrics and ground-level purchasing power.
