Jan 05, 2014 (LBO) – Sri Lanka’s inflation measured by a private consumer price index rose 4.8 percent in the 12 months of 2013 in line with the 4.7 percent measured by the state statistics office. In Feb 2012, the rupee was floated, allowing the peg to fall to around 118 to the US dollar and interest rates were raised.
The monetary authority then engaged in partial defence of the currency peg and near-full sterilization, a deadly combination of contradictory monetary and exchange rate policies that saw the rupee slide to 130 in a few weeks.
The combination of liquidity shortages and interest rates then slowed credit.
In past balance of payments crises, in the year after the crisis is over, when the rupee has been allowed to appreciate against the US dollar amid low credit growth, the index has been near zero or in negative territory.
The CAL Urban Price Index, compiled by CAL Research, a Colombo-based consultancy, uses prices in several urban areas in the country and is based on a fixed basket.
The state statistic office uses Colombo based pries. The CAL index uses prices from around the country.
Sri Lanka is recovering from a balance of payments crisis in 2011/2013