Inflation could rise to 7% amid ME conflict: CBSL Governor

Sri Lanka’s inflation rate has a possibility of rising to 7% due to the ongoing conflict in the Middle East and rising global fuel prices, Central Bank of Sri Lanka (CBSL) Governor Dr Nandalal Weerasinghe said, speaking on Ada Derana 360 on Monday (1).

“We have observed a continuous increase in fuel prices, while consumer demand has not shown any significant decline. Therefore, there is a risk that inflation could move beyond 5% and even reach 7% if these conditions persist,” he said.

Dr Weerasinghe stated that although it was initially anticipated that the Middle East conflict would be resolved in the short term, its prolonged duration has had significant repercussions on Sri Lanka’s economy.

He noted that fuel prices have continued to rise, creating upward pressure on inflation. According to the Governor, inflation, which is currently projected at around 5.4-5.5%, and is likely to increase further if present trends continue.

Dr Weerasinghe explained that the Central Bank recently tightened its monetary policy as a precautionary measure to curb inflationary pressures. He added that reducing demand over the coming months would be essential to prevent inflation from accelerating further and to maintain economic stability.

The Governor emphasised that there are no restrictions on remitting legally earned funds to Sri Lanka through the formal banking system.

He stated that money earned through lawful means can be transferred to Sri Lanka without difficulty, provided it complies with the country’s anti-money laundering regulations. However, he noted that funds obtained through illegal means would face legal and regulatory obstacles.

Source: The morning