The International Monetary Fund (IMF) projected Sri Lanka’s inflation to revert to around 5% by end-2018.
Issuing a statement at the conclusion of the 2018 Article IV consultation under the three-year Extended Fund Facility (EFF), the IMF pointed out that Sri Lanka’s economy is gradually normalising.
“Real GDP growth is projected to rise to 4.4 percent in 2018, supported by a recovery in agriculture and industry and robust growth in services, reaching 5 percent over the medium term,” the IMF said following discussions with the Sri Lankan authorities.
Amidst the supply side disruptions in agriculture due to the series of weather-related shocks in 2017, Sri Lanka’s inflation, as measured by the Colombo Consumer Price Index had overshot its target of between 4-6% 2017 ending the year at 7.1%. The 12-month inflation had also peaked at 7.8% in October.
However, in February 2018, the 12-month headline inflation fell to 4.5% from 5.8% year-on-year in January as the Colombo Consumer Price Index slipped for the second consecutive month, recent data released by the Census and Statistics Department of Central Bank showed. Meanwhile, the IMF highlighted that the successful implementation of the new Inland Revenue Act and the Central Bank’s Roadmap towards inflation targeting representing landmark reforms, is critical going forward. “Fiscal consolidation is advancing, with preliminary data showing a primary surplus in 2017. The CBSL has been effective in curbing credit growth and stabilising inflation despite recent pressures, while stepping up its pace of reserve accumulation. The IMF staff team, who visited Colombo from February 27 – March 9 was led by Manuela Goretti. - AR