Sri Lanka Reports First Deflation in 39 Years

Sri Lanka experienced its first deflation in 39 years, with a recorded rate of negative 0.5% in September 2024, marking a significant shift from a peak inflation of 69.8% during the 2022 economic crisis. The deflation was driven by declines in both food and non-food prices, contrasting with inflation of 0.5% in August 2024. This deflationary trend is attributed to the Central Bank's policies aimed at stabilizing currency and managing liquidity, alongside a general fall in global prices. Economic growth is reportedly recovering, with expectations of a 4% increase in 2024, as the Central Bank has maintained a deflationary stance for nearly two years. The history of inflation in Sri Lanka has been influenced by external economic policies and internal mismanagement, leading to reliance on IMF programs. The situation reflects a complex interplay between historical economic policies, recent reforms, and the ongoing challenges faced by the nation.