Sri Lanka's inflation turns negative at -1.7% for November

Sri Lanka's inflation rate dropped to minus 1.7% year-on-year in November, following a decrease to minus 0.7% in October, according to official data released on Monday.

The drop marks a significant recovery for the country after enduring its worst financial crisis in decades. The National Consumer Price Index (LKNCPI), which tracks broad retail price inflation, showed food prices remained stable at 0.0% in November, down from 1.3% in October.

Prices in the non-food category fell to minus 3.1%, an improvement from minus 2.3% in the previous month.

Analysts attribute the decline in inflation to various factors, including reductions in power tariffs, fuel prices, and the appreciation of the Sri Lankan rupee. This marks the lowest inflation rate Sri Lanka has seen in nine years, signaling the stabilization of its economy.

Shehan Cooray, head of research at Acuity Stockbrokers, noted that inflation is expected to remain at these levels for the first two months of 2025. However, he also cautioned that if foreign exchange pressures arise, particularly from resumed vehicle imports, inflation could gradually rise, though it is unlikely to exceed 4%.

Sri Lanka experienced record inflation in 2022, largely due to a financial crisis triggered by a sharp decline in dollar reserves.

The country began to stabilize after securing a $2.9-billion bailout from the International Monetary Fund (IMF) in March 2023. Following the low inflation rate, Sri Lanka’s central bank set a new policy rate of 8% last month, easing monetary settings to support further economic recovery.

Sri Lanka's economy is projected to grow by 4.5-5% in 2024, slightly surpassing the World Bank’s estimate of 4.4%, according to central bank data.