Sri Lanka’s inflation down but outlook is still cloudy – analysts

Sri Lanka’s inflation rate, which dropped to single digits for the first time in months in July, may still face headwinds from rising water, food and energy prices, analysts say, in a challenge for a crisis-hit country seeking to foster growth.
Inflation has dropped sharply in recent months from the 69% hit last September, partly due to the statistical base effect, but also due to a stronger currency and better harvests.
A severe foreign exchange crunch triggered Sri Lanka’s worst financial crisis in seven decades last year, triggering the inflation surge. But figures released Monday showed its key inflation rate nearly halved to 6.3% from 12% in June.
Economic stability has improved since March after a $2.9 billion rescue package from the International Monetary Fund (IMF).
However, the country needs to focus on reducing losses at state enterprises and to pass on energy prices as per IMF conditions which may boost inflation, analysts warned.