Inflation doubles as energy prices surge

Sri Lanka’s inflation more than doubled to 5.4 percent in April, mainly due to higher energy prices linked to the ongoing conflict in the Middle East, official data showed.

Higher fuel and electricity tariffs pushed up transport costs and food prices, according to the Department of Census and Statistics.

Sri Lanka raised petrol and diesel prices by nearly a third and hiked electricity tariffs by up to 40 percent after the United States and Israel launched attacks on Iran in late February.

The island has been slowly emerging from the 2022 meltdown, when it ran out of foreign exchange reserves to pay for essential imports such as food, fuel, and medicines.

However, it was hit hard in November by a cyclone that killed at least 643 people and affected more than 10 percent of the island’s 22 million people.

The storm caused an estimated $4.1 billion in direct physical damage to buildings and agriculture, according to the World Bank.

The country has been stabilizing its fragile economy with the help of a $2.9 billion IMF bailout agreed in early 2023, but high energy prices have seriously challenged recovery efforts.

The year-on-year increase in the Colombo Consumer Price Index was 5.4 percent in April, compared with an expansion of 2.0 percent in March and a deflation of 2.0 percent a year ago.

The latest figure is higher than the 5.0 percent forecast by the Central Bank of Sri Lanka.

Official data showed that non-food inflation was even higher, at 6.8 percent in April, up from 2.9 percent in March and down from 3.6 percent a year earlier.

Inflation peaked at nearly 70 percent in September 2022, at the height of the country’s worst economic crisis.