Sri Lanka inflation hits two and a half year high at 4.8-pct in May

ECONOMYNEXT – Sri Lanka’s consumer price inflation accelerated to 4.8 percent in the 12-months to May from 3.1 percent a month earlier, hitting a 2.5 year high, data from the state statistics office showed.

Food prices rose 2.2 percent in the month, after rising 2.2 percent a month earlier.

Sri Lanka’s central bank followed loose monetary policy in 2015 and precipitated a balance of payments crisis, which it does every 3 to 4 years and the currency collapsed from 131 to 147 to the US dollar.

Inflation last reached these levels in December 2013, as the country recovered from the last balance of payments crisis. During the last crisis inflation hit 9.8 percent measured by the Colombo Consumer Price Index.

The index is also frequently revised to understate inflation.

However even inflation of 10 percent is better than the 20 percent plus level of price increases generated by the Sri Lanka’s central bank in the past.

Analysts and economists have called for the central bank to be abolished so that it cannot generate balance of payments trouble and high inflation by printing money to finance the budget deficit. (Colombo/May31/2016)

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