Mar 28, 2008 (LBO) – Most of Sri Lanka’s inflation is not ‘imported’ or caused by oil, a major new International Monetary Fund research study has found, indicating that the mainly home grown price rises could be slashed with better economic policies. . The IMF study released Saturday that covers a steep rise in Sri Lanka’s inflation in 2006 and 2007 found that external ‘shocks’ such as oil prices – which are often touted as the reason for inflation by politicians – are not significant in explaining inflation.
“Since late 2006, Sri Lanka’s inflation has increased sharply relative to other economies in the region,” the study noted.
“The sharp increase in inflation compared to other countries in Asia points out that increases in oil prices in the recent past (a common shock to most economies in the region) cannot explain most of the increase in inflation in Sri Lanka.”
Oil prices explained only 6 percent of the inflation in 2006 and 2007 measured by the New Colombo Consumer Price Index, a statistical analysis by IMF researchers covering oil prices, the exchange rate and imports, has showed.
Home Grown Shock
The study found that most of the inflation in Sri Lanka is home grown.