Sri Lanka’s inflation ‘worrying’, other South Asian nations doing better : IMF

From left: Dr. Fernando Im, Senior Country Economist for Sri Lanka and the Maldives, The World Bank, Hon. Eran Wickramaratne, State Minister, Ministry of Finance and Mass Media, Dr. W A Wijewardana, Former Deputy Governor of the Central Bank of Sri Lanka, Prof. Indralal de Silva, Former (Chair) of Demography, University of Colombo, Prof. Amala de Silva, Department of Economics, University of Colombo at the panel discussion on "Demographic Change in Sri Lanka" moderated by Dr. Ramani Gunatilaka, International Centre for Ethnic Studies.

SINGAPORE, Sep 17 (LBO) – Though other South Asian nations are doing reasonably well in fighting inflation Sri Lanka’s central bank must be more vigilant and do more to stabilize prices, a senior IMF official said. “The mainstay of monetary policy is to maintain financial stability and low inflation.

South Asian economies are doing reasonably good job, the head of IMF’s Asia and Pacific Department David Burton said.

However, in Sri Lanka, inflation has picked up somewhat [and is] on the higher side, which is worrying.

Sri Lanka’s inflation moderated in 2005 as government finances improved with tsunami aid flows, but has started to rise in the second quarter as central bank credit to government or printed money volumes rose.

In August Sri Lanka’s 12- month consumer inflation climbed to 15.3 percent.

You need to bring it down, Burton said. The central bank must be vigilant about this.

The Central Bank’s intervention rates, and 12 month gilt rates are now about 5 percentage points lower than inflation resulting in negative real rates.

Burton said inflation was damaging to poor people, though it was not the key tool for reducing poverty in the long term