Inflation is projected to remain elevated in the coming months before moderating thereafter, the Central Bank of Sri Lanka said.
The bank said that headline inflation is projected to remain escalated in the near term on account of domestic supply shortages, increased global commodity prices, the effects of the large depreciation of the Sri Lanka rupee against the US dollar thus far during the year, along with the impact of aggregate demand pressures.
However, inflation is expected to moderate thereafter reflecting the impact of corrective policy measures of the Central Bank and the expected improvements in both domestic and global supply conditions.
Moreover, it is envisaged that the recent tightening of monetary conditions and the strengthening of monetary policy communication will help anchor inflation expectations of the public in the period ahead.
The Central Bank also said that the near term outlook of the tourism sector is likely to remain unfavourable due to both global and domestic factors.
Meanwhile, gross official reserves as of end April 2022 were provisionally estimated at US dollars 1.8 billion, including the swap facility from the People’s Bank of China equivalent to around US dollars 1.5 billion, which is subject to conditionalities on usability.
The Central Bank and the Government have commenced technical level discussions with the International Monetary Fund aimed at working towards a programme to address the macroeconomic challenges faced by the economy, while expeditious arrangements are being made to commence the external debt restructuring process.
Meanwhile, negotiations have already begun with bilateral and multilateral partners to obtain bridging finance in order to secure foreign exchange required to finance imports of essential goods and strengthen the social safety net programmes.
