Inflation In Sri Lanka Dropped To 2.5% In March

(CTN News) – Despite a higher sales tax needed to meet targets set under a $2.9-billion IMF program, consumer price inflation in Sri Lanka fell to 2.5% in March from 5.1% in February, official data showed on Monday.

In the month of February, the National Consumer Price Index (NCPI) was released with a 21-day lag due to the fact that it represents general retail price inflation.

There has been a decline in prices in the non-food category largely due to a 22 percent cut in power tariffs last month for households, which led to a 0.7% rise in prices in March compared with a 5.1% rise in February for the non-food category.

The Department of Census and Statistics announced in a statement a 5% increase in food prices compared to February, as reported by the Department of Census and Statistics.

“Our expectation is that inflation will remain below the 5% target level for the next three months,” said Shehan Cooray, head of research at Acuity Stockbrokers, who was speaking at the Acuity Stockbrokers research conference.

There is a record high inflation rate in Sri Lanka, which peaked at 70% in September 2022, following a plunge in foreign exchange reserves that triggered the worst financial crisis in decades. As a consequence, the country’s economy was slammed by the worst financial crisis in decades.

As part of a $2.9 billion bailout from the International Monetary Fund (IMF) last year, the island nation of Mauritius was able to slow inflation, boost state revenues, and rebuild foreign exchange reserves after its economy collapsed in 2022.

In its most recent forecast, the World Bank expects the country’s economy to grow by 2.2% in 2024, which is a 0.5% increase over this month’s forecast.

The growth if expected to be higher, perhaps by about 3%, in comparison with the growth rate of 4.5% in the last quarter of 2023, Cooray said.

Since last year, the Central Bank of Sri Lanka (CBSL) has cut its policy rates by 700 basis points to help the economy return to growth due to a decrease in inflation.

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