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Sri Lanka to start nation-wide consumer price index

ECONOMYNEXT – Sri Lanka will start a nation-wide price index with 2013 chosen as the base year, Cabinet spokesman Rajitha Senaratne said.

Prime Minister Ranil Wickremesinghe has proposed to the cabinet of ministers that the index be released from November.

Sri Lanka already has a consumer price index covering Colombo.

Sri Lanka had a country-wide index up to 2007, but it was suppressed when inflation reached 29 percent claiming that it was getting ‘politicized’ because the then opposition United National Party was criticizing the state for generating high inflation.

Sri Lanka then started changing base years and revising the basket frequently, techniques widely adopted from the second half of the 20th century by governments in the West to understate inflation.

Inflation rose sharply after World War II when many countries started to print money under the failed Bretton Woods system and state-connected statisticians tried to find ways to understate inflation.

By frequently revising the basket in times of rising inflation, cheaper substitutes that people use, when prices of some goods go up (when people move down to sprats and dried fish from larger sized fresh fish) helps under-state real inflation.

At the moment global commodity prices are falling due to a stronger US dollar coming from tighter monetary conditions in the US.

Sri Lanka’s national price index will be compiled using prices collected from all nine provinces and will be released monthly, according to the Ministry off National Policies and Economic Affairs.






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