ISSN: 1391 - 0531
Sunday March 2, 2008
Vol. 42 - No 40

Inflation booms over 20s

By Natasha Gunaratne

Sri Lanka’s inflation is hovering at 21.6 percent, up from 20.8 percent in January. In the old index, the CCPI, inflation is recorded at 24 percent, also up from 21.6 percent in January, according to statistics released by the Department of Census and Statistics on the new Colombo Consumer Price Index, the CCPI(N) for February.

The Central Bank of Sri Lanka uses the point-to-point change as its official measure of inflation and is now using the CCPI(N) as the official consumer price index.

Muttukrishna Sarvananthan, principal researcher at the Point Pedro Institute for Development, said the most likely reason behind the increased inflation was the rise in food prices because there were no hikes in local petroleum prices or utilities such as water and electricity. "It is most probably food prices, particularly rice, coconuts, wheat and imported goods," he said.

Dr. Sarvananthan explained that the higher inflation recorded in the CCPI as opposed to the CCPI(N) was due to the weighting of food items. In the old index, food items were weighted at 60 percent, much higher than in the new index where food items were weighted at around 48 percent.

Harsha de Silva, lead economist at Lirneasia, said no country in the region was currently experiencing inflation anywhere near 24 percent as indicated by the old index. He said even the 'suppressed new index’ recorded current inflation at 21.6 percent.

Dr. de Silva said it was unfortunate that millions of poor and lower middle class people in the country were driven to desperation with the ongoing bout of very high inflation.

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