Sri Lanka’s Headline inflation, as measured by the year-on-year (Y-o-Y) change in the National Consumer
Price Index rose to a record high of 6.8 percent in July 2021 from 6.1 percent in the previous month amidst monetary stimulus measures adopted by the Central Bank of Sri Lanka and import restrictions.
Both Food and Non-food categories contributed to the rising inflation. Accordingly, Food inflation (Y-o-Y)
increased to 11 percent in July 2021 from 9.8 percent in June 2021 and Non-Food inflation (Yo-Y) increased to 3.2 percent in July 2021 from 2.9 percent in June 2021.
Inflation especially has an adverse impact on the country’s poor, low-income and middle-class segments as the real wages decline. Last year, over 0.5 million of the population fell into poverty due to high inflation and income losses occurred due to lockdowns and travel restrictions imposed to curtail the spread of the COVID-19 virus.
The inflation rates also moved beyond the CBSL targeted range of 4-6 percent.
Monthly changes of Food and Non-food categories were also recorded at 0.37 percent and 0.27 percent, respectively
within the Food category, prices of sugar, vegetables, dried fish, and fresh fish increased whereas, prices of coconut and coconut oil recorded decreases. Moreover, prices of items in the Non-Food category recorded an increase mainly due to price increases observed in the Transport (Petrol and Diesel) and Restaurant and Hotels sub-categories during the month.
Further, year-on-year core inflation increased to 4.4 percent in July 2021 from 4.1 percent in June 2021,
while annual average core inflation remained unchanged at 4.4 percent in July 2021.