Sri Lanka's key inflation rate halves to 6.3% in July
SRI Lanka’s key inflation rate nearly halved to 6.3 per cent in July from 12 per cent in June, the statistics department said on Monday (Jul 31), marking the first time inflation has dropped to single digits in months for the crisis-ridden economy.
Soaring inflation has battered the economy for more than a year after a severe foreign exchange crisis set off the Indian Ocean island’s worst financial crisis in seven decades.
The Colombo Consumer Price Index (CCPI) reflected food inflation, hitting a negative 1.4 per cent from 4.1 per cent in June. Non-food inflation was 10.5 per cent, the Census and Statistics Department said in a statement.
In the last six months, inflation has gradually eased from a high of 50.6 per cent in February after the government changed the base year of inflation in its calculation from 2013 to 2021.
Last September, inflation soared to 69.8 per cent, with food inflation at 94 per cent.
“Inflation is tapering off faster than expected, helped partly by the appreciation of the rupee, which is making imports cheaper,” said Shehan Cooray, head of research at Acuity Stockbrokers.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
“We expect inflation to keep reducing and end the year below 5 per cent.”
After Sri Lanka secured a US$2.9 billion bailout from the International Monetary Fund (IMF) in March, its economic stress is slowly subsiding, with its currency appreciating about 10 per cent this year and reserves improving.
Inflation has come down sharply in the last two months from the runaway levels seen earlier, partly due to the statistical base effect, but also helped by better harvests, and a stronger rupee, which has lowered costs for food, fuel and power.
But the economy is expected to record a 2 per cent contraction, according to government estimates, after shrinking 7.8 per cent last year.
Encouraged by inflation easing faster than expected, Sri Lanka’s central bank cut policy rates by 450 basis points in June and July this year, after raising them a record 1050 basis points till March.
The Central Bank of Sri Lanka (CBSL) is expected to continue easing interest rates in the second half of the year to improve growth.
The figure for national consumer price inflation, released with a lag of 21 days every month, also eased to 10.8 per cent in June from 22.1 per cent in May. REUTERS
Share with us your feedback on BT's products and services
