Sri Lanka’s consumer price index fell 2.1 per cent year-on-year in November after dropping 0.8 per cent in the previous month, the statistics department said on Friday.
The Colombo Consumer Price Index, a leading indicator for broader national prices, tracks inflation in Colombo, Sri Lanka’s largest city.
Prices in the food category slipped to 0.6 per cent this month from 1 per cent in October. In the non-food category, prices dropped to minus 3.3 per cent on the month from minus 1.6 per cent in October.
Reductions in power tariffs and fuel prices as well as an appreciating rupee have helped to reduce inflation to the lowest point in nine years, analysts said.
“Deflation is expected to be around till February and we are likely to see inflation reach the central bank’s projection of 5 per cent around August or September 2025,” said Dimantha Mathew, head of research at First Capital.
Sri Lanka suffered record inflation after its worst financial crisis in decades pummelled the economy, which has stabilised since it secured a $2.9-billion bailout from the International Monetary Fund (IMF) in March 2023. Taking advantage of low inflation, Sri Lanka’s central bank set a new single policy rate of 8 per cent on Wednesday, easing monetary settings below previously used benchmarks and setting the stage for a sustained recovery from the crisis.
Sri Lanka’s economy is expected to grow by 4.5 per cent-5 per cent in 2024, slightly above the World Bank’s estimate of 4.4 per cent, latest central bank data showed.
On Tuesday, Sri Lanka launched a long-awaited bond swap, a major step to completing its $12.55 billion debt restructuring and enabling its fragile economic recovery to continue.
Bondholders have until Dec. 12 to vote in support of the proposal, which would see them swap existing bonds for a set of new issues.