Inflation to stabilise between 4 and 6 percent

By Rathindra Kuruwita

Sri Lanka’s inflation will fall further in August and then stabilize between 4 and 6 percent, the Director of the Central Bank’s Economic Research Department, Dr. P. K. G. Harischandra told journalists on Thursday (03).

Addressing journalists in Colombo, he said that inflation in July had dropped to 6.3 percent.

This will further drop due to policies that the government and Central Bank have taken, he said.Dr. Harischandra added that they expect the country’s GDP growth to be positive in the second, third, and fourth quarters of 2023.

However, given that the economy contracted significantly in the first quarter of 2023, it is unlikely that GDP growth will be positive this year, he said, adding that the GDP growth will be positive in 2024, he said.

Sri Lanka’s inflation has been dropping steadily since September 2022, when the Colombo Consumer Price Index (CCPI) recorded inflation at 69.8 percent. Dr. Harischandra said that the Central Bank will now issue monetary policy review reports twice a year, most likely in January and July.

Some countries produce these reports once every three months, however, at present, the Central Bank has decided that two will suffice.

“These reports create greater transparency and can also provide guidance to the market,” he said.

According to the recently passed Bill on the Central Bank, officials have to appear before Parliament where MPs can question them, Dr. Harischandra said.He added that, as per the new Bill, there should be 11 members on the monetary board, and he hopes that the appointments will be made within two months.

The Central Bank is also studying the possible impact of drought on agricultural production in the Yala season.

“However, fertiliser is available in the market, and the impact of drought outside paddy farming areas should be minimal. So far, the agricultural production has been good,” he said.