Sri Lanka inflation at 4.7-pct in December 2013

Dec 31, 2013 (LBO) – Sri Lanka’s consumer prices rose 4.7 percent in the 12 months to December 2013, slowing from 5.6 percent in November, the state statistics office said. In the month of December the widely watched Colombo Consumer Price Index remained flat during the month at 176.5 points, the same as in November.

Sri Lanka has seen weak credit growth in 2013, allowing for inflationary pressures to be low.

In the second half of the year there has been de-leveraging at state enterprises which borrowed heavily to subsidize energy in 2011 and 2012 driving inflationary pressures up, and pushing the country into a balance of payments crisis.

Sri Lanka generally sees low inflation or deflation where the index actually falls, following a balance of payments crisis, especially when the exchange rate tends to appreciate after an initial fall as credit contracts.

Similar trends were seen in the wake of the 2001/2 and 2008/9 balance of payments crises.

The Central Bank, while cutting policy interest rates had not actually printed money to keep rates down.

However analysts say if the Central Bank allowed the exchange rates to appreciate in the latter h