Sri Lanka Records Historic Deflation After 39 Years

• Sri Lanka’s economy recorded falling consumer prices for the first time in 39 years,
• Inflation fell to negative 0.5% in September, marking the first deflation since October 1985.
• Both food and non-food prices contributed to the deflation.

Colombo: Sri Lanka’s economy experienced a decrease in consumer prices for the first time in nearly four decades, according to official data released on Monday. The Census and Statistics Department reported that inflation fell to negative 0.5 percent in September, marking the country’s first instance of deflation since October 1985, when it was recorded at negative 2.1 percent.

Both food and non-food prices contributed to the September deflation, a significant change from the 0.5 percent inflation rate reported in August. The country had previously seen inflation peak at 69.8 percent two years ago during a severe economic crisis that caused shortages of essential goods and sparked widespread protests.

The economic turmoil led to the resignation of former president Gotabaya Rajapaksa in July 2022. His successor, Ranil Wickremesinghe, secured a $2.9 billion bailout from the International Monetary Fund (IMF) and implemented austerity measures, including tax hikes, to stabilize the economy.

Following the presidential election earlier this month, newly elected President Anura Kumara Dissanayake has committed to maintaining the IMF program while pledging to ease some of the stringent economic measures introduced during Wickremesinghe’s tenure.

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