Sri Lanka’s inflation slows down to 70.6% in October 2022

The Overall rate of inflation as measured by the National Consumer Price Index (NCPI) on a Year-On-Year basis was 70.6% in October 2022, compared to 73.7% in September 2022.

Food Inflation dropped to 80.9% in October 2022, compared to 85.8% in September 2022 while Non-food inflation was 61.3%, said the Department of Census and Statistics on Monday (November 21) in a statement.

Sri Lanka has been struggling with soaring inflation for nearly a year, partly triggered by its worst financial crisis in seven decades and an ill-thought out ban on chemical fertilizer implemented last year, which has since been reversed.

“Prices will not go down but they are stabilising,” said Rehana Thowfeek, economist at the Colombo-based Advocata Institute think tank.

“The government is introducing fresh taxes and other measures to stabilise the economy. So households will continue to feel price pressure.”

Central Bank of Sri Lanka Governor Nandalal Weerasinghe predicted that if the current trend of monetary policy was followed, inflation could drop to 4% – 5% by the end of next year.

In an effort to tame prices and stabilise markets, the bank has raised interest rates by 900 basis points this year. Its final policy announcement for 2022 will be on Thursday.

The NCPI captures broad retail price inflation across the island nation and is released with a lag of 21 days every month.

The Colombo Consumer Price Index (CCPI) (LKCCPI=ECI), released at the end of each month, is more closely monitored. It acts as a lead indicator for broader national prices and shows how inflation is evolving in the biggest city of Colombo.

The CCPI eased to 66% in October, data showed last month.

In September, Sri Lanka reached a preliminary deal with the International Monetary Fund for a $2.9 billion bailout but it needs to get its debt on a sustainable track and put its public finances in order before funds can be disbursed.

Sri Lanka was battered by COVID-19, which slashed tourism and remittances from workers overseas. It was then hit by rising oil prices, populist tax cuts and the seven-month ban on the import of chemical fertilisers that devastated agriculture.

(With inputs from Reuters)