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Inflation skyrockets in Sri Lanka with food prices at record high

Sri Lanka’s benchmark inflation rate, measured by the National Consumer Price Index, accelerated to 14.2 per cent in January, up from 12.1 per cent in December 2021 , the Central Bank announced on Monday 31 , amidst a severe a foreign exchange crisis.

 

This was for the third consecutive month after inflation recorded double digit growth for the first time in November since the index came to be compiled from 2014

Prices skyrocketed for food products (25 percent vs 22.1 percent in December) and surged for non-food products (9.2 percent vs 7.5 percent). On a monthly basis, consumer prices went up 2.4 percent, slowing from a 2.7 percent rise in December.

In the long-term, the Sri Lanka Inflation Rate is projected to trend around 6.50 percent in 2022 and 6.00 percent in 2023, according to econometric models.

In Sri Lanka, the Consumer Price Index (CPI) is composed of two main groups: Food items (41 percent) and Non-food items (59 percent). Food items are mainly composed of: bread and cereals (7.9 percent), fish and sea food (6 percent) and vegetables (5.7 percent). The most important non-food items are housing water, electricity, gas and other fuels (23.7 percent), transport (12.3 percent), and restaurants and hotels (5.8 percent).

Meanwhile, on an annual average basis, the CCPI increased to 6.9 per cent in January 2022 from 6.0 per cent in December 2021. 

Inflation was driven by monthly increases of prices of items in both Food and Non-food categories. Subsequently, Food inflation (Y-o-Y) increased to 25.0 per cent in January 2022 from 22.1 per cent in December 2021, while Non-food inflation (Y-o-Y) increased to 9.2 per cent in January 2022 from 7.5 per cent in December 2021.

 Monthly change of CCPI recorded at 2.43 per cent in January 2022 due to price increases observed in items of both Food and Non-food categories which were 1.15 per cent and 1.28 per cent, respectively. 

Accordingly, within the Food category, prominent increases were observed in prices of rice, fresh fruit, milk powder, and bread.

 Further, prices of items in the Non-Food category recorded increases mainly due to price increases observed in the Transport (Petrol, Diesel, Bus fare), Housing, Water, Electricity, Gas and other fuel (Housing Rent, Maintenance/Reconstruction), Education (Course fees for higher education and vocational training), and Restaurant and Hotels subcategories during the month. The core inflation (Y-o-Y), which reflects the underlying inflation in the economy, increased to 9.9 per cent in January 2022 from 8.3 per cent in December 2021. Moreover, annual average core inflation increased to 5.0 per cent in January 2022 from 4.4 per cent in December 2021, Central Bank said. 

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