Sri Lanka’s key inflation rate eases to 35.3% in April

Port of Colombo in Sri Lanka

Buildings are seen over the containers at the Port of Colombo in Colombo, Sri Lanka, on Wednesday, April 25, 2022. (Photographer: Buddhika Weerasinghe / Bloomberg via Getty Images)

Sri Lanka’s key inflation rate eased to 35.3% in April from 50.3% in March, the statistics department said on Friday, a sign of relief for the crisis-battered economy.

The Colombo Consumer Price Index (LKCCPI=ECI) (CCPI) reflected a reduction in food inflation to 30.6% in April from 47.6% in March, while non-food inflation reached 37.6%, the Census and Statistics Department said in a statement.

Sri Lanka has been struggling with soaring prices for more than a year as it grapples with the worst financial crisis since gaining independence from Britain in 1948.

April’s inflation was blunted by a reduction in fuel prices, lower demand and easing global commodity prices, analysts said, with inflation likely to moderate faster over the next three months.

“This decline is in line with expectations,” said Sanjeewa Fernando, senior vice president of research at Asia Securities. “By June inflation is projected to decline to about 14% to 15%, partly because of the high base effect.”

The central bank kept interest rates steady in early April and expressed optimism for inflation to decelerate sharply in the coming months, in its first policy decision since securing a $3-billion bailout from the International Monetary Fund (IMF).

Central bank Governor Nandalal Weerasinghe said a favourable base effect would kick in from next month, with inflation projected to hit single digits by the end of December.

The figure for national consumer price inflation, released with a lag of 21 days every month, rose slightly to 49.2% in March, also dropping below 50% for the first time since last August.

The CCPI, a lead indicator for broader national prices, tracks inflation in Colombo, Sri Lanka’s biggest city.