Sri Lanka's inflation expected to hit 5% in medium term

SRI Lanka’s spike in inflation is expected to be short-lived and will return to the targeted 5 per cent in the medium term, a monetary policy report released by the central bank said on Thursday (Feb 15) as the island nation’s economy stabilises from a crippling financial crisis.

Sri Lanka’s economy is seeing glimmers of recovery, helped by a US$2.9 billion International Monetary Fund (IMF) programme, after it went into freefall in 2022 due to a severe foreign exchange shortage.

At the start of 2024, Sri Lanka raised its value added tax (VAT) to 18 per cent from 15 per cent to meet revenue targets under the IMF programme sparking a renewed rise in its key inflation rate, which rose to 6.4 per cent at the end of last month from 4 per cent in December. REUTERS