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Wednesday July 6th, 2022

Sri Lanka inflation hits 15.1-pct in Feb 2022, a 13-year high

ECONOMYNEXT – Sri Lanka’s inflation in the capital Colombo accelerated to 15.1 percent in February 2022 from 14.2 percent in December, a 13-year high, after two years of money printing compounded by a commodity bubble fired by the US Federal Reserve.

In the month of February 2022, Sri Lanka Colombo Consumer Price Index, the most widely watched index rose 1.1 percent to 160.1 points after rising 2.4 percent a month earlier.

Sri Lanka has been printing money to keep interest rates down and expanding both reserve money and broad money since February 2020, after expanding the budget deficit by cutting taxes.

Sri Lanka printed 1.2 trillion rupees in 2021, a part of which was to repay debt buy reserves from the central bank as interest rates were too low to collect inflows from the current account.

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Sri Lanka money printing tops Rs1.2 trillion in 2021

Over the two years ending December 2021, broad money and reserve money both grew 40 percent.

Food prices are up 35 percent since February 2020, when money printing was ratcheted up.

Part of the inflation is coming from a rise in exported and imported commodities, which have risen as the US Fed fired a commodity bubble.

US inflation hit 7 percent, the highest since the early 1980s, when Fed Chief Paul Volcker ended the Great Inflation of the 1970s. The Sri Lanka rupee is loosely pegged to the US dollar.

Sri Lanka’s inflation is the highest since November 2008 when the CCPI Index hit 16.3 percent. The index had a higher weighting of food at the time but domestic monetary policy was tighter.

At the time the Greenspan-Bernanke bubble had just burst. US Fed chief Jerome Powell is also printing money blaming ‘transient inflation’ and supply chain bottlenecks.

Sri Lanka’s printed money money is spilling over to the balance of payments, creating forex shortages.

Gross official and forex reserves in January fell to 2.3 billion US dollars, with December imports at 2.2 billion US dollars. (Colombo/Feb28/2022)

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  1. Bao says:

    I am a senior high school student, and I think this article is awesome, so I want to quote this article for my economy assignment, may I know the name of this article? Thank you!

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  1. Bao says:

    I am a senior high school student, and I think this article is awesome, so I want to quote this article for my economy assignment, may I know the name of this article? Thank you!