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Inflation in May 2018

Headline Inflation, as measured by the change in the National Consumer Price Index (NCPI, 2013=100), which is compiled by the Department of Census and Statistics (DCS), increased to 2.1 per cent in May 2018 from 1.6 per cent in April 2018, on year-on-year basis. The increase in the year-on-year inflation in May 2018 was mainly driven by upward price revisions to the items in the Non-food category. The change in the NCPI measured on an annual average basis decreased from 6.1 per cent in April 2018 to 5.7 per cent in May 2018.
When monthly change is considered, the NCPI increased from 122.9 index points in April 2018 to 124.3 index points in May 2018 largely due to the increase in prices of the items in the Non-food category, particularly that of Transport (upward fuel price revision); Housing Water Electricity Gas and Other Fuels (Kerosene Oil, LP Gas); and Health sub-categories. Meanwhile, price increases were observed in the items in the Food category such as vegetables, fresh fish, big onions, limes and potatoes owing to seasonal factors.

Sri Lanka Purchasing Managers’ Index - May 2018

The Manufacturing Sector PMI recovered in May following the seasonal contraction observed in the previous month and recorded an index value of 60.6 in May with an increase of 15.1 index points from April. The recovery of PMI was largely attributable to the significant increase in production to cater both the new orders received during the month and the uncompleted orders received in April due to the new year holidays, especially in the manufacturing of textiles, wearing apparel, leather and other related products. New Orders, Stock of Purchases and Employment sub-indices also increased during the month. However, the Employment sub-index in manufacturing of textiles, wearing apparel, leather and other related products still remains in the negative territory. Meanwhile, the Suppliers’ Delivery Time sub-index marginally lengthened due to the adverse weather conditions prevailed in the latter part of the month.

The International Monetary Fund Releases the Fifth Tranche of US dollars 252 million under the Extended Fund Facility

The Executive Board of the International Monetary Fund (IMF) concluded the 2018 Article IV consultation with Sri Lanka and completed the fourth review of the three-year Extended Fund Facility (EFF), approving the disbursement of the fifth tranche amounting to SDR 177.774 million (approximately US dollars 252 million). The EFF aims at supporting the Balance of Payments and the broad economic reform agenda of the government.
The IMF acknowledged the progress made by the authorities to stabilise the economy and support growth through an improved policy mix of fiscal consolidation, prudent monetary policy and structural reforms. The IMF commended the authorities for achieving major milestones in terms of structural reforms, including the launch of the new Inland Revenue Act, automatic fuel pricing formula and the Central Bank of Sri Lanka’s Roadmap for flexible inflation targeting, while stressing the importance of sustaining the reform momentum going forward.