Inflation hits record high on drought

Reuters: Sri Lanka’s consumer price inflation hit a record high of 7.3% in March under a new index, government data released on Friday showed, which analysts attributed to the impact of a lingering drought, higher taxes and a weaker rupee, besides the effect of a low base year.

The inflation, measured on the Colombo Consumer Price Index (CCPI), rose to 7.3% in March from a year earlier, accelerating from the previous month’s 6.8% under a revised base-year and market basket.

“This is predominantly because of the prices of food and other materials except energy going up,” said Danushka Samarasinghe, an economist and research head at Softlogic Stockbrokers.

“The economy is seeing the full impact of the value added tax (VAT) increase. The rupee depreciation is also having an impact. Food prices have risen due to the drought.”

Inflation measured on a 12-month moving average basis also hit an all-time high of 5.0%, compared with the previous month’s 4.6%.

Core annual inflation, which excludes fresh food, energy, transport, rice and coconuts, rose to 7.3% in March, compared with the previous month’s 7.1%, the index with a new base year of 2013 showed.

The rupee has fallen 1.4% this year, resulting in expensive imports.