Sri Lanka inflation rate surges to 70.2% in August

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Sri Lankan rupees are seen in a bowl at a vegetable vendor's shop amid the rampant food inflation, amid Sri Lanka's economic crisis, in Colombo

By Uditha Jayasinghe

(Reuters) – Consumer inflation in Sri Lanka accelerated to 70.2% in August, the statistics department said on Wednesday, as the island nation reels under its worst economic crisis in decades.

The National Consumer Price Index (NCPI) rose 70.2% last month from a year earlier, after a 66.7% increase in July, the Department of Census and Statistics said in a statement.

Food prices climbed 84.6%, while prices of non-food items rose 57.1%.

The Central Bank of Sri Lanka (CBSL) said in August that the inflation rate would moderate after peaking at about 70% as the country’s economy slowed.

The NCPI captures broader retail price inflation and is released with a lag of 21 days every month.

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The more closely monitored Colombo Consumer Price Index (CCPI), released at the end of each month, rose 64.3% in August. It acts as a leading indicator for national prices and shows how inflation is evolving in Sri Lanka’s biggest city.

Sri Lanka’s economy shrank 8.4% in the quarter through June from a year ago in one of the steepest declines seen in a three-month period, amid fertiliser and fuel shortages.

“Inflation is expected to taper from September,” said Dimantha Mathew, head of research for Colombo-based investment firm First Capital.

“However, inflation is only likely to moderate and reach single digits in the second half of 2023.”

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An acute dollar shortage, caused by economic mismanagement and the impact of the COVID-19 pandemic, has left Sri Lanka struggling to pay for essential imports including food, fuel, fertiliser and medicine.

The country earlier this month reached a preliminary deal with the International Monetary Fund for a loan of about $2.9 billion, contingent on it receiving financing assurances from official creditors and negotiations with private creditors.

(Reporting by Chris Thomas in Bengaluru, Editing by Louise Heavens and Kim Coghill)

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