Sri Lanka inflation slows to 5.8-pct in April

Apr 30, 2010 (LBO) – Consumer prices in Sri Lanka’s capital Colombo rose 5.8 percent in April 2010 from a year earlier, down from 6.3 percent in March, the second straight monthly fall, the government’s statistics office said. In the month of April the Colombo consumer price index fell 1.0 percent in absolute terms to 212.6 points from 214.8 points a month earlier.

The slowing down of inflation came despite growing fears of inflationary pressures rising amid heavy government spending, debt monetization and excess liquidity.

“We have some of the highest policy rates,” Central Bank governor Nivard Cabraal said.

“But we are watching liquidity closely.”

Sri Lanka’s excess liquidity had come from monetization of debt further along the yield curve though the central bank has been mopping up the liquidity with high policy rates overnight.