“Sri Lanka makes historic dip in inflation from 70% to 6% in a year”

Sri Lanka has made a historic turn around with regard to inflation levels from maintaining the highest in Asia (around 70%) a year ago to being the lowest in the region in just one year.

The Central Bank predicts that the inflation rate in Sri Lanka from the current 6.2% will move to even lower level at around 1% for a brief period and stabilize around 4%.

Currently Bangladesh’s inflation stands as the highest at 8% followed by Nepal 6.8%, India at 6.7% Afghanistan around 6% (according to available data) and Maldives at 4.4%.

Central Bank Economic Research Department Director, Dr. P. K. G. Harischandra yesterday said the government’s initiatives that led to economic revival, along with tight monetary policy regulations by the Central Bank led to the lowering of inflation.

He recalled that the Central Bank has accurately for many months predicted the declining figures of the high inflation in Sri Lanka.

He also said that the inflation in the UK is around 7 % but however in other developed countries this is at around 2%. Dr. Harischandra said that the negative growth trends like, escalation of oil and gas prices along with skilled labour migration may have a somewhat negative effect on local inflation in the future.

“The weather patterns which may have a negative effect on electricity generation and agriculture too may put pressure on the low inflation to rise.”

Asked to comment on the current moderate exchange rate and if it would increase again when Sri Lanka starts foreign debt servicing he answered in the negative.

“After Sri Lanka went for the IMF bailout Sri Lankan creditors have given Sri Lanka sufficient grace period for debt repayment.”

Sri Lanka needs to pay around USD 17 billion only in 2027 and don’t have immediate pressure in debt servicing.”

He also said that Sri Lanka has now received more than anticipated foreign receipts by way of bilateral aid.

“In addition Sri Lanka is now attracting good revenue from tourism with average arrivals at around 150,000 per month and expected to increase to around 200,000 per month in the last three months of 2023.”

Similarly, Sri Lanka is also receiving increase foreign remittances which are now being channeled through banking channels.

“Also the country is attracting around USD 1 billion average monthly export turnover which all relieves the pressure on the dollar while the imports too are not too high.”