June 29, 2012 (LBO) – Sri Lanka’s consumer prices rose 9.3 percent in June 2012 from a year earlier, accelerating to a three and a half year high, from 7.0 percent in May, data from the state statistics office showed. The statistics office said Sri Lanka’s Colombo Consumer Price Index rose 1.9 percent during the month of June to 165.2 points. Sri Lanka’s rupee fell from 110 to 133 rupees over the past year, following contradictory monetary policy conducted by the Central Bank which pushed credit to unsustainable levels and triggered a balance of payments crisis.
Sri Lanka’s inflation last hit these levels in January 2009 when prices rose 10.7 percent from a year earlier, during the island’s previous balance of payments crisis.
Sri Lanka gets into frequent balance of payments crisis because the island has a so-called soft pegged Central Bank which sterilizes foreign exchange sales.