Monday, September 26, 2022

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SL  Inflation Hits a Record high of  45.3  percent as  food and fuel Shortages Persist

Sri Lanka’s headline inflation has surged more than expected in May 2022  to 45.3 percent from 33.8 percent  in April 2022 amid continuing food and fuel shortages, even as the country struggles to lift itself out of its worst economic crisis, Central Bank announced. 

The Central Bank, which this month left borrowing costs steady while letting previous increases filter through the economy, had predicted price gains to touch 40 percent  amid a shortage of essentials in the absence of dollars to pay for imports.

A sharp fall in the Sri Lankan rupee and heightened global uncertainty also stoked prices. After having lost more than 40 percent  following a devaluation in March, the currency has slowed its decline against the dollar since mid-May.

The country, battling its worst economic crisis since independence, needs $4 billion in emergency funds this year but a deal with the International  Monetary Fund for rapid aid remains elusive. 

Securing an aid from the IMF would require structural reforms such as raising taxes and pruning expenditure, steps that could further aggravate pain for its citizens, political analysts said. 

Headline inflation, as measured by the year-on-year (Y-o-Y) change in the National Consumer Price Index (NCPI, 2013=100)1 increased to 45.3 percent  in May 2022 from 33.8 percent  in April 2022 , Central Bank data showed. 

This increase in Yo-Y inflation was driven by the monthly increases of both Food and Non-Food categories. Accordingly, Food inflation (Y-o-Y) increased to 58.0percent  in May 2022 from 45.1percent  in April 2022, while Non-Food inflation (Y-o-Y) increased to 34.2percent  in May 2022 from 23.9 percent  in April 2022. 

Monthly change of NCPI recorded at 9.67 percent  in May 2022 due to price increases observed in items of both Food and Non-Food categories which were 5.41 percent  and 4.26percent , respectively. 

Accordingly, within the Food category, prices of rice, milk powder, vegetables, fresh fish and bread recorded increases during the month. 

Further, within the Non-Food category, increases were observed in prices of Transport (Petrol, diesel and bus fare), Housing, Water, Electricity, Gas and Other Fuel (Materials for maintenance/reconstruction and LP gas), Furnishing,

 Household Equipment and Routine Household Maintenance, and Miscellaneous Goods and Services (Car insurance and soap) subcategories during the month. Meanwhile, annual average inflation rose to 16.3percent  in May 2022 from 13.0 percent  in April 2022. 

The core inflation (Y-o-Y), which reflects the underlying inflation in the economy increased to 37.7 percent   in May 2022 from 27.9 percent  in April 2022, while annual average core inflation increased to 13.0 percent  in May 2022 from 10.2 percent  in April 2022.

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