Sri Lanka’s headline inflation may rise to 70% in coming months – Central Bank of Sri Lanka

Nandalal Weerasinghe - Governor of the Central Bank of Sri Lanka

Nandalal Weerasinghe – Governor of the Central Bank of Sri Lanka (REUTERS / Dinuka Liyanawatte)

Sri Lanka’s headline inflation is expected to rise to 70 percent in the coming months from the current level of 50%, the Governor of the Central Bank of Sri Lanka, Dr. Nandalal Weerasinghe says.

The Central Bank Governor said if inflation increases further, companies will face major difficulties to remain in business.

His remarks came during a media briefing in Colombo today (July 07) to announce the Central Bank’s 05th monetary policy review for the year 2022.

Governor Nandalal Weerasinghe said the Central Bank is taking decisions to safeguard the most vulnerable groups in the society who will be affected by the increase in inflation.

He said they will have to look into social safety net programs such as Samurdhi to help the poor.

According to the Central Bank, in June headline inflation was at a record high of 54.6 percent, driven mainly by inflation in groups such as transport, restaurant and hotel, food and non-alcoholic beverages. In the month of June, overall food inflation was recorded at 80.1 percent, while non-food inflation was at 42.4 percent.

The Central Bank noted that the major factors that contributed to the unprecedented high-level acceleration in headline inflation were the global energy and food price hikes and associated passthrough to domestic prices, domestic supply side disruptions along with the impact of the depreciation of the rupee, tax adjustments and the lagged impact of monetary accommodation.

The Governor noted that due to certain decisions and adjustments, inflation rate will increase and small and medium scale businesses that have taken loans will face difficulties in honouring their debt.

He said therefore they are determined to keep inflation at manageable levels.

Governor of the Central Bank Nandalal Weerasinghe stressed that they will be taking decisions from time to time to stabilise the economy.

He also said despite the implementation of a fuel pricing formula, the Ceylon Petroleum Corporation continues to incur losses.