Sri Lanka may see higher inflation if higher oil prices prolong: CB governor

EconomyNext reports that Central Bank Governor Nandalal Weerasinghe warned an investor forum this week that Sri Lanka could face higher inflation if global oil prices stay elevated for a prolonged period. The forum was organized jointly by the Colombo Stock Exchange and the Securities and Exchange Commission of Sri Lanka.

EconomyNext reports that inflation measured by the Colombo Consumer Price Index stood at 8.1% in September, its highest level in 40 months, with fuel prices and their broader effects identified as key drivers. The outlet says the state-owned Ceylon Petroleum Corporation had increased fuel prices by about 50% since the Middle East conflict began.

EconomyNext reports that the Central Bank’s June projections assumed oil would move toward $90 a barrel by year-end, but prices were still higher than expected. Weerasinghe said the bank believed inflation could be managed at current levels even if oil reached around $100 a barrel. He also said persistent higher oil costs could cause supply-related price shocks that feed into domestic prices and push inflation above current levels.

EconomyNext reports that Weerasinghe framed the policy response around the source of inflation, saying monetary policy mainly addresses demand-driven pressures and that the bank was assessing whether supply-side inflation was affecting expectations or demand. The outlet describes Sri Lanka’s exposure through imported fossil fuels used in electricity generation, freight transport and agricultural machinery.

Newsfirst reports that inflation is expected to remain above 8% in the coming months before gradually easing. Its report also says foreign reserves, remittances and government revenue are showing signs of recovery, but the available account provides no further figures or timing.