Aug 29 (Reuters) COLOMBO- Sri Lanka's annual inflation
rate may have accelerated to near record high of 10.2 percent
year-on-year in August as an extended drought pushed up food
prices and as a weaker rupee aggravated import bills.
The sharp dip in the rupee currency along with higher
foodprices drove annual inflation in the $59 billion economy to
a 42-month high of 9.8 percent last month.
The rupee has depreciated 16.8 percent since
November, making imported inflation a serious threat. The
country imports most essential food commodities as well as fuel.
Consumer goods accounted for 20 percent of last year's total $20
billion import bill.
"We haven't seen an improvement in (food) supply due to the
continued drought," one analyst said on condition of anonymity.
"The import prices are yet to factored in, though rupee has
been more or less flat (in August)."
Food accounts for more than 40 percent of the basket of
items used to compile inflation figures.
The government has reduced import taxes of selected
essential goods since last month and the central bank has said
supply shocks will taper off with expected monsoon rains next
Central Bank Governor Ajith Nivard Cabraal told Reuters last
week that annual inflation in August is unlikely to hit double
digits because of steps that have been taken by the government.
The International Monetary Fund in its latest staff
assessment report (link.reuters.com/juw69s) has said that
the current monetary policy stance is appropriate, and a
tightening bias should be maintained in the near term until
further evidence of diminishing inflation pressures and credit
The central bank in August kept its key policy rates
unchanged after raising them twice since February to two-year
highs, saying a spike in inflation was due to adverse weather
conditions and the resulting disruptions to domestic food