Central Bank Governor Dr. Nandalal Weerasinghe said that due to the current economic crisis, inflation may go up to 70% or even higher before settling down next year.
He said that inflation has also accelerated to an unprecedentedly high level predominantly due to global energy and food price hikes and associated pass-through to domestic prices, domestic supply side disruptions along with the impact of the depreciation of the rupee, tax adjustments and the lagged impact of monetary accommodation.
“The inflation may even go up by 100% (hyperinflation) where the ground situation would not be able to carry out any businesses hence several meaningful steps are taken to curtail this from further accelerating to unprecedented levels.”
He said that the International Monetary Fund (IMF) team that arrived in Sri Lanka too was concerned of this fact and have also recommended giving some ‘handout’ to the poor and vulnerable sectors which the government would do during the next Budget that would be announced in August.
With continued and appropriate corrective policy measures, alongside the expected normalization of world commodity prices with the normalization of supply conditions over the medium term, headline inflation is expected to trend downwards and is projected to be in line with the desired range over the medium term. The Governor also said the global fuel prices too are dipping from around US$ 117 per barrel to around US$ 100 and this too will positively help towards reducing inflation.
“Going forward he subdued aggregate demand stemming from tight monetary and fiscal conditions and the favourable statistical base effect would also aid in softening inflationary pressures.”
courtesy dailynews
