Inflation in Sri Lanka dropped to 6.3% in July from 12% in June, said the Census and Statistics Office of the Sri Lankan government on July 31. The country saw a single-digit figure for the first time in two years.
The drop in headline inflation is according to the disinflation path predicted by the Central Bank of Sri Lanka (CBSL) in July 2023. A statement from the Census and Statistics Office said that the decrease in the cost of food commodities led to the decline in inflation. Based on the Colombo Consumer Price Index, food prices fell by 1.4% over the past 12 months in the island country.
The last time Sri Lanka recorded single-digit inflation in September of 2021 – at 5.8%. The highest inflation its economy recorded was 69.8% in September 2022. The CBSL said that inflation is expected to moderate further and stabilise around the targeted level over the medium term.
In 2021-22, Sri Lanka faced its worst economic crisis in history due to a shortage of foreign exchange reserves. During the forex crisis, the country curtailed imports, leading to shortages and high prices. The International Monetary Fund bailout of $2.9 billion in March 2023 led to a relaxation in import restrictions and action to end power shortages, improving the situation significantly.