Sri Lanka’s consumer price inflation recorded a deflation of 0.8% in the 12 months ending October 2024, with only a 0.3% increase over the past 25 months as the effects of the central bank’s deflationary policy begin to manifest in the balance of payments.
The Colombo Consumer Price Index (CPI) declined by 0.5% in October 2024, dropping to 189.9 points from 190.9 points in September. The food price index also saw a decrease of 0.6%, falling to 231.9 points from 233.3 points.
The central bank’s deflationary policy began to impact the balance of payments significantly, achieving a surplus since the CPI was at 189.3% in September 2022. Additionally, the central bank has allowed the Sri Lankan rupee to appreciate during this period.
Historically, Sri Lanka’s central bank has faced challenges in managing currency shortages, often resorting to printing money to purchase domestic assets from primary or open markets, through either outright or term transactions.