Sri Lanka’s inflation 3.4-pct in August

Bread seller, baker

ECONOMYNEXT – Sri Lanka’s inflation edged up to 3.4 percent in August 2019, from 3.3 percent as month earlier data from the state statistics office showed.

The Colombo Consumer’s Price Index barely grew to 130.1 points in August from 130.0 percent a month earlier.

Until July 2019, Sri Lanka’s central bank has been steadily mopping up inflows amid weak credit and allowed the exchange rate to appreciate.

But in mid July it stopped mopping up and in the first week of August, started to print money heavily, driving excess liquidity to 50 billion rupees, triggering monetary instability.

Sri Lanka was badly hit by monetary instability in 2018 after large volumes of money was printed in March/April and August September under a so-called flexible exchange rate.

The rupee collapsed from 153 to 182 to the US dollar in 2018. Credit has been weak or negative in 2019 after the currency collapse.

Amid recent quantity tightening and rate rises, global commodity prices have also fallen. (Colombo/Aug30/2019)