Sri Lanka's inflation index up 8% year-on-year in August on higher food prices

Sri Lanka's inflation index increased by 8% year-on-year in August, the Statistics Department announced on Monday. This follows an 8.3% rise in July, according to the Colombo Consumer Price Index, which serves as a gauge for inflation in Sri Lanka's capital. Food prices drove the surge, climbing to 8.5% year-on-year from 6.3% in the previous month, due to a severe drought in key food production regions and a spike in global wheat prices, according to analysts.

The non-food category saw a 7.7% increase, the same as the previous month's figure. Despite a easing in the Middle East crisis, the International Monetary Fund (IMF) warns Sri Lanka's economy remains vulnerable, emphasizing the importance of reforms. An IMF representative stated that inflation is expected to reach 8.5% over the next two months, before stabilizing, contingent on weather conditions and global prices.

The country's inflation rate has been at a three-year high since last month, primarily caused by higher energy costs stemming from the Iran conflict. The Central Bank of Sri Lanka has set an inflation target of 5% and anticipates a gradual decline in inflation over the medium term.