By: Staff Writer
Colombo (LNW): Sri Lanka’s inflation rate reached single digits for the first time in 20 months, setting the stage for the central bank to slash borrowing costs further to support recovery.
The key inflation rate nearly halved to 6.3% in July from 12% last month. The island nation’s statistics department released the numbers for Colombo district recently.
This is the first instance where inflation has dropped to single digits in over a year in the crisis hit Indian Ocean Island.
However the people of this country is still facing economic hardships as the prices of essential items have been at the same level before amidst high cost of living.
Sri Lanka’s headline, core, food and non-food inflation was reported at 69.8%, 50.2%, 94.9% and 57.6%, respectively, in September 2022, while in June 2023, they were 12.0%, 9.8%, 4.1% and 16.2%, in that order.
This is a clear indication that although the price fluctuation rate of essential goods and services has declined to a single digit, the price increase is still at the same level with slight changes.
Tight monetary and fiscal policy measures are being attributed for the attainment of Central Bank’s self-imposed target of 6%.In addition, in February this year, the government had changed the base year of inflation in its calculation from 2013 to 2021.
Sri Lanka had faced a runaway inflation of up to 70% recorded last year in September.
Inflation is a critical indicator of an economy’s health, but it can be misleading when not scrutinized closely.
A single-digit inflation rate may sound reassuring, but it is essential to examine the components contributing to this decline.
Is the decrease driven by essential goods and services, which have a direct impact on our daily lives, or is it attributed primarily to non-essential items that may not significantly affect the average citizen’s budget? Several eminent economists questioned.
While official inflation statistics might suggest a manageable cost of living, the reality may be starkly different.
The prices of essential goods such as housing, education, healthcare, and food might still be increasing at a pace that burdens the majority of Sri Lankans.
Despite the claims of falling inflation, many citizens continue to struggle to make ends meet, leading to growing concerns over their overall well-being, they pointed out.
The widening gap between the rich and the poor continues to be a pressing issue in Sri Lanka, exacerbated by a lack of job opportunities for many.
Even with a single-digit inflation rate, income inequality persists, leaving a significant portion of the population marginalized and struggling to cope with the rising costs of basic necessities they claimed.
This disparity further deepens the challenges faced by the vulnerable sections of society, perpetuating the cycle of poverty.
