SL’s red-hot inflation further up to 40% in May

• Food prices up 57.4% while non-food prices rose 30.6% on fuel & gas price revisions
• Core inflation at 28.4%, up from 22 % in April

Colombo’s inflation was recorded at an eye-popping 39.1 percent in the twelve months to May, accelerating from 29.8 percent in April, setting another fresh high after the botched rupee float in early March. 

Consumer prices are charging at a pace Sri Lankans have never experienced in their lifetime as the global commodities inflation, stoked by the pandemic related stimulus and then by the Russia’s invasion in Ukraine in February, collided with the badly executed float of the rupee on March 7, sending rupee value spiralling down by 80 percent thus far, against the US dollar. 

This, combined with the acute shortage of dollars, sent the prices of everything from essentials to discretionary to services higher by many fold within a few weeks, and made sticker pricing of goods and services by traders virtually ineffective as prices now change almost every day. 

This was exacerbated by the administratively managed price revisions such as petroleum products and cooking gas, making Sri Lanka only second to Zimbabwe and Venezuela, where people carry bags full of cash when they go shopping. 

After jacking up the interest rates by an unprecedented 700 basis points on April 8 to tame the demand side pressures of inflation, the Central Bank a fortnight ago said that the current bout of inflation cannot be tamped down by rate hikes as they are mostly supply-driven and also due to one-off price adjustments. 

 Among the categories which underpinned the May inflation were the food prices which rose by 57.4 percent from the same month a year ago, accelerating from 46.6 percent in April. The monthly prices however eased to 9.7 percent from 12.5 percent in April. 

However, there is no guarantee that the trend would not continue as Sri Lanka is at the forefront of a large-scale food shortage as only 50 percent of arable lands are cultivated in the ongoing season while the availability of fertiliser is also in limbo due to the shortage of dollars. 

Without fertiliser the harvest will be less, causing a massive supply and demand gap, and many people would starve for many months to come, as unlike in other times, the government cannot fill the gap with food imports. 
Meanwhile, non-food inflation climbed 30.6 percent in the twelve months to May 2022, speeding up from 22 percent in April predominantly due to the transport subcategory, followed by utilities, both of which saw significant price increases as a result of upward price revisions in fuel and gas. 

The monthly prices of non-food items rose by 7.5 percent from 7.6 percent in April. 

Meanwhile, the so called core prices, measured leaving out often volatile items such as food, energy and transport, charged by 28.4 percent in the twelve months to May, from 22 percent in April.