Sri Lanka’s Key Inflation Rate Falls to 5.9% in Feb

(Reuters) – Sri Lanka’s key inflation rate fell to 5.9% in February from 6.4% in January, the statistics department said on Thursday.

The Colombo Consumer Price Index, a leading indicator for broader national prices, tracks inflation in Colombo, Sri Lanka’s biggest city.

Food prices rose 3.5% in February from 3.3% in January, the Department of Census and Statistics said in a statement.

Prices for non-food items rose 7% this month from 7.9% year-on-year in January.

Despite an increase in Value Added Tax (VAT) from 15% to 18% at the start of the year, as part of efforts to meet government revenue targets set under a $2.9 billion International Monetary Fund (IMF) bailout, Sri Lanka’s inflation is expected to return to the 5% target set by the central bank, analysts said.

“This is in line with expectations. Inflation numbers are continuing to benefit from a high base effect and we expect March inflation to drop to about 2.6%,” said Dimantha Mathew, head of research, First Capital.

“We project inflation to be between 4%-7.5% from April to about the end of this year.”