Analysts last week said that the deflation recorded by Sri Lanka in July was momentary and it was expected to pick up during the latter part of the year.
Sri Lanka recorded a 0.2 percent deflation, first time since March 1995. Senior Lecturer in Economics at the University of Colombo, Dr. Sirimal Abeyratne speaking to The Nation said that the reason for deflation would be attributed to the drop in commodity prices worldwide.
“It’s a worldwide phenomenon. It’s not a bad thing at the moment since it’s a worldwide phenomenon, not confined to Sri Lanka. However, we expect it to pick up once prices such as oil increases in future,” he said.
Further, he pointed out that a future Government would have to adjust commodity prices in Sri Lanka according to the prevalent market forces. “Sri Lanka has managed to keep interest rates low. However, when you consider the external aspects such as the international debt and the foreign exchange rates, it would be difficult for us to maintain at this rate. Therefore, we expect the rates to increase after the elections,” he said. “The future Government would have to look at internal and external finances and make changes accordingly.” (AW)