Srilanka, Aug. 9 -- In 2024 and 2025, Sri Lankan banks collectively lent slightly less than one billion dollars in the Indian market as there was excess dollar liquidity in Sri Lanka due to lower trade demand, and India's strong domestic expansion created opportunities for Sri Lankan financial institutions to deploy those funds productively.

It may be questioned that when Government is being supported through an International Monetary Fund (IMF) program how there was enough liquidity with Sri Lankan banks to deploy funds in India.

The apparent contradiction arises because sovereign finances and commercial bank balance sheets are distinct. While IMF financing addresses the government's 'balance of payments' and fiscal vulnerabilities, b...