Prices rise as Sri Lanka inflation shoots up to 70 per cent
A KEY measure of Sri Lanka’s consumer inflation surged to an annual record 69.8 per cent in September, official data showed last Friday (3), highlighting the challenge for the central bank as the island reels under its worst crisis in seven decades.
The Colombo Consumer Price Index (CCPI), a leading indicator that gauges inflation in Sri Lanka’s biggest city, accelerated past the previous all-time yearon-year high of 64.3 per cent in August.
Policymakers closely track the CCPI to make their monetary assessments.
Earlier last month, Sri Lanka’s other main inflation measure, the National Consumer Price Index (NCPI), which captures broader retail price inflation, also touched a record 70.2 per cent in August.
The country of 22 million people has been grappling with a dramatic surge in inflation for nearly a year as volatile global prices and a sharp depreciation in the value of its currency battered the economy.
Dwindling foreign exchange reserves to fund imports have intensified Sri Lanka’s crisis, causing shortages in essentials in a further blowout in the cost of living.
Food prices continue to bear the brunt of the inflationary impact, climbing to 93.7 per cent, while prices of non-food items rose 50.2 per cent, the statistics office said.
In an effort to tame prices and stabilise markets, the Central Bank of Sri Lanka has raised interest rates by 900 basis points this year.
The central bank was expected to stand pat on rates at its Thursday (6) policy review, after holding steady in August, as policymakers are counting on an easing in inflation over coming months.
Analysts expect a further contraction in the September quarter, which would tip the country into a technical recession. Any easing in consumer prices will be marginal at best, analysts say, forecasting high inflation rates will remain till about the end of the first half of 2023.