Sri Lanka’s inflation dips to 33.6%

Sri Lanka’s National Consumer Price Index (NCPI) inflation eased to 33.6 per cent year-on-year in April, after a 49.2 per cent rise in March, the statistics department said on Monday.

The National Consumer Price Index captures broader retail price inflation and is released with a lag of 21 days every month.

Food price rises eased sharply to 27.1 per cent in April from 42.3 per cent in March, while non-food inflation was at 39 per cent, the Department of Census and Statistics said in a statement.

The data comes as an International Monetary Fund team is in Colombo to evaluate Sri Lanka’s economy for the first time since the global lender approved a nearly $3 billion bailout in March.

Sri Lanka is grappling with its worst financial crisis in seven decades, triggered by a severe shortfall of foreign exchange.

Sri Lanka has been struggling with soaring inflation since early last year but it has been decreasing in 2023, with analysts predicting it will reach single-digit levels by September.

“This reduction is mostly due to the high base effect from last year and recent reduction in transport costs,”,” said Dimantha Mathew, head of research, at First Capital Holdings.

Over the next two months we expect inflation to reduce drastically to about 20 per cent or even below that,” added Dimantha Mathew.

Easing inflation rates could also nudge the Central Bank of Sri Lanka (CBSL) to loosen high interest rates, possibly from about August, Mathew added.

The Colombo Consumer Price Index, released at the end of each month, dropped to 35.3 per cent in April from 50.3 per cent in March, data from the statistics department showed.