The Sundaytimes Sri Lanka

Inflation rises in June : Central Bank


Sri Lanka’s inflation rose to 9.3 per cent in June from 7 per cent in the previous month while annual average inflation increased to 5.8 per cent from 5.6 per cent in the same months, the Central Bank (CB) said this week in its monthly economic review.

It said Sri Lanka achieved all targets set under the Stand-By Arrangement (SBA) facility with the International Monetary Fund (IMF), and thereby qualifies to receive the final ($420 million) tranche under the SBA facility. “Such disbursement, along with other expected significant foreign inflows, is likely to strengthen the external position of the country in the coming months, and enhance the gross official reserves, which stood at US$ 5.8 billion as at 31st May 2012, which is equivalent to 3.4 months of imports,” the report said.

The government is also seeking another $500 million facility from the IMF.The CB said the increase in inflation in June  was mainly due to the lower base, the impact of the prevailing drought conditions on domestic fresh food prices and the recent revisions to administratively determined prices.

Credit growth by commercial banks reduced from its peak of 35.2 per cent in March to 33.5 per cent in May 2012. Thus credit extended in the first five months of the year, grew only by 10.5 per cent.  “In the meantime, provisional data shows that the growth of import expenditure has been shrinking sharply in the first five months of the year, thereby narrowing the trade deficit, compared to the high levels recorded in 2011,” it said.

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