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Inflation to peak? Sri Lanka’s central bank governor gives his prediction

IFM_Sri Lanka Central Bank Governor
Sri Lanka started talking with its creditors about reorganising its debt last month, and officials are hopeful that a deal with the IMF could be reached before the end of the year

Nandalal Weerasinghe, the governor of Sri Lanka’s central bank, believes that the island nation’s inflation has peaked and that price increases will likely slow down this month.

Nandalal Weerasinghe recently said that he thought inflation had reached its peak, even though the crisis-hit country still needed to fix its economy and finances.

In September, a key indicator of Sri Lanka’s consumer inflation rose to 69.8%. This shows the central bank’s problem as the South Asian country deals with an unprecedented financial crisis.

Nandalal Weerasinghe, however, asserted in the interview that “it will be turning around, and if that is lower in October, as we anticipate, then we can see that trend will continue.”

It is still being determined whether the central bank will stop raising interest rates for a long time.

Nandalal Weerasinghe said that, in addition to the inflation rate, “We need to evaluate the forecast, expectations, monetary expansion, the growth forecast, the level of reserves, and the policy on the exchange rate.”

Even though price increases were expected to slow down in December and January, the governor said the bank must keep rates high this month to fight inflation.

Sri Lanka started talking with its creditors about reorganising its debt last month, and officials are hopeful that a deal with the International Monetary Fund could be reached before the end of the year.

The International Monetary Fund and the government have agreed that the administration will give the legislature the budget for 2023 in the middle of November. This budget is expected to feature increased taxes and broader reforms of state-owned firms.

Sri Lanka had a financial crisis in 2019 because of several rating downgrades caused by the epidemic and the effects of significant tax cuts. This made it impossible for Sri Lanka to access global financial markets.

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