Sri Lanka inflation hits 39.1-pct in May after money printing, botched float

ECONOMYNEXT – Sri Lanka’s inflation in the capital Colombo rose to 39.1 percent in May, data from the statistics office showed, after two years of money printing and a botched float with a surrender requirement that sent the rupee crashing to 380 from 200 to the US dollar.

The Colombo Consumer Price Index grew 8.3 percent in May after rising 9.3 percent in April with no sign yet that the central bank has got control of reserve money, though rates have been raised to kill private credit.

Food prices rose 57.4 percent in the 12-months leading up to May.

Food prices are up 75 percent from December 2019 when extreme fiscal and monetary stimulus started.

Food prices are up 86.7 percent from July 2019, when the central bank started inflationary policy with outright purchases of bonds, losing the ability to run balance of payments surpluses as private credit recovered from an earlier BOP crisis in 2018.

Sri Lanka has an intermediate regime central bank (reserve collecting peg or flexible exchange rate) which runs into crisis as soon as money is printed to target create higher inflation or stimulate growth (output gap). (Colombo/May31/2022)



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