August inflation moderates as food price gains slow

Friday, 1 September 2023 00:24 - - {{hitsCtrl.values.hits}}

Sri Lanka’s disinflation trend continued in August, aided by slower rise in food prices and an exceptionally high base effect from last year. The consumer price index in Colombo rose 4% from a year ago in August, the Statistics Department said on Thursday.

It’s slower than the 4.5% gain seen in a Bloomberg survey, and 6.3% in July — the first time that price gains cooled to single digits since November 2021.

Sri Lanka’s Central Bank, which has eased monetary policy by 450 basis points in two moves since June, kept borrowing costs steady in August while slashing banks’ cash reserve ratio and unveiling other measures to drive down lending rates to support economic growth. Policymakers are monitoring the impact of a drought and rising global commodity prices on food inflation, even as they keep watch for downward pressure on the rupee following the lifting of import curbs.

An International Monetary Fund bailout, together with increased inflows from tourism and remittances, have stoked optimism for Sri Lanka’s recovery.

The authorities are engaged in a debt restructuring plan and an economic reform agenda to meet commitments by the end of the IMF’s first program review. In exchange, the Government is looking to secure a $ 330 million disbursement.

(Source: Bloomberg)