Sri-Lanka. September inflation accelerates to 7.1% amid soaring food prices

02.10.2017

Sri Lanka’s consumer prices measured by the Colombo Consumer Price Index (CCPI) rose to 7.1 percent in September—the second time the prices rose above 7.0 percent during the year as the prices of many staples rose sharply, the consumer price data released by the state statistics office showed.

September month marks the third month in a row the prices have been rising as headline inflation trended upwards from 4.8 percent in July to 6.0 percent in August.

According to the Census and Statistics Department data, the prices of food items such as rice, fish, coconut and big onions rose on a month-on-month basis but the increase in prices from last year was much steeper although the vegetable prices have eased.

On a month-on-month basis the food prices have risen by 1.6 percent but these prices have jumped by as much as 10.4 percent from the same month last year.  The steeper rise in prices in rice and coconut became the talking point in recent times as a kilo of Samba rice reached above Rs.135 while the price of a coconut reached Rs.100, ironically in a country blessed for centuries with a

While the paddy harvest was well below the potential due to extreme weather caused destruction during both Yala and Maha seasons, exorbitant coconut prices are blamed on man-made destruction as unregulated clearance of coconut lands for housing by real estate developers.

Urban middle income consumer has now resorted to buying half the nut and the grocer is now armed with an electronic coconut scraper to do the job for which he charges an extra five rupees, effectively pricing the half a nut at Rs.55, unheard of in Sri Lanka before. Meanwhile, the rise in prices of less volatile items measured by the core inflation, which excludes the impact of food and energy, rose by 6.0 percent in September, unchanged from August which had the same reading.

This demonstrates how food and energy could influence the monthly consumer price index. Economists forecast further price pressures during the remainder of the year due to multiple reasons.

They cited the recent hike in gas prices, the impending increase in fuel prices and the demand pressure as the country nears the year-end festive season, which anyway props up the prices.

The increase in fuel prices will have ripple effects through the economy, as it would lift the prices of all items from transportation, distribution to food and beverage.

Sri Lanka last week left the key interest rates unchanged as the Central Bank is of the view that the prices and the credit in the economy was trending down as the earlier policy measures to tighten the money is making in roads in to the real economy.

But a section of the economists remain sceptical as the price pressure is seen building up and the Central Bank’s 5.5 percent to 6.0 percent growth target could


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