Inflation soars in June and then eases

The Colombo Consumers' Price Index shows a huge increase in inflation in the month of June 2006 with economists and officials attributing it to many reasons.

Several factors have gone into this escalation, according to Dr Anila Bandaranayake, Director of the Census and Statistics Department at the Central Bank. The price of leaded fuel increased, resulting in increases in the distribution and transportation costs. International import prices have also gone up increasing production costs on the manufacturing side as well as increases for retail prices on agricultural products. The heavy rains experienced in the country during that period delayed produce from entering the market on time.

Dr Saman Kelegama, Director at the Institute of Policy Studies, said the sharp rise in inflation for the month of June was mainly due to the increase in oil and food prices. International oil prices had a cost push effect. Kelegama further added that the New Year holidays in April and the subsequent ones in May led to some disruption of food supplies which were reflected in the June figures.

There were also international price increases in wheat and sugar.

There was a subsequent decrease in inflation in July 2006 which the Census & Statistics Department of Sri Lanka attributes to the decrease in prices of garlic, red onions, some varieties of fresh fish, some varieties of dried fish, coconuts, eggs and most varieties of vegetables.

The Department explained that the price decreases were a result of higher supply of food items to the main markets in Colombo City as well as the influence of seasonality for domestic agricultural products during this period.

The Department also explained that the price of bread, wheat flour, rice and curry, sugar, milk tea, dried chillies, lime, cowpea whole, manioc, jam (MD), cream cracker biscuits, fresh fish (balaya and small mullet) and dried fish (katta and koduwa) have increased during this month.

(NG)