Sri Lanka’s inflation hits 17.2% in October, despite falling oil prices

October 31, 2006 (LBO) – Consumer prices in Sri Lanka bounced up to 17.2 percent in October from 15.4 percent in September, the Census & Statistics Dept said Tuesday, due to higher prices of fuel, cigarettes, alcohol and certain types of food.

The rise in inflation came despite a fall in international oil prices, and multiple cuts in local retail fuel prices during the month, exposing oft repeated official claims that Sri Lanka’s inflation is caused by oil prices.

Some economists had been warning that Sri Lanka’s inflation would continue to rise despite falling oil prices because of excessive money printing to finance the budget deficit.

They point out that Sri Lanka’s balance of payments is also under pressure for the same reason.

Central Bank credit to the government in terms of treasury bill purchases alone had risen from about 20 billion rupees in February to 63 billion in October.

However, inflation rate for October was a tad lower than the 17.7 percent recorded in June this year.

On a 12-month moving average, inflation for October was 11.8 percent from 11.2 percent recorded in Sept.

The government usually takes the twelve month moving average as the official inflation figure.

The department sai