Sri Lanka central bank sees inflation cooling to 4%-5% end 2023

SRI Lanka’s inflation is expected to significantly cool in the coming months after peaking near 70 per cent this year, central bank governor Nandalal Weerasinghe said.

Consumer price gains are seen to ease to 4-5 per cent by the end of 2023 as the central bank’s monetary policy transmission is working, Weerasinghe said in a speech at a CT CLSA investor forum in Colombo on Monday (Nov 28). As foreign currency inflows improve, the government can gradually relax the currency band as the nation needs a flexible currency for inflation targeting, he said.

The troubled South Asian economy has raised borrowing costs by 950 basis points this year that took the key rate to 15.5 per cent as inflation bolted to become Asia’s fastest. Monetary tightening prevented hyper inflation, Weerasinghe said

The central bank wants to convince lenders to bring down market rates as inflation eases, the governor said. The next important step for the crisis-laden country is to complete its debt restructuring, Weerasinghe said.

The government is targeting to get the International Monetary Fund’s board approval for the bailout fund in January, said the governor, adding that the earlier estimate of a December approval may be tight. BLOOMBERG