July inflation likely to rise

While inflation has general decelerated in 2007, the Central Bank warned this week that point-to-point inflation is likely to rise in July but once again show a downward trend in inflation.

It said in a statement that so far inflation, measured by the point to point change in the Colombo Consumers’ Price Index (CCPI), has indicated a deceleration. In line with this trend, inflation decelerated further to 13.0 per cent in June from 13.7 per cent in May 2007.

Exports increased by 14.4 per cent while imports increased at a relatively lower rate of 7.5 per cent during the first five months of the year. The resulting trade deficit during this period narrowed down by 4.1 per cent. In addition, a continuous healthy growth has been recorded in worker remittances, offsetting the impact of the trade balance on the current account balance.

The debut issue of the international bond during September 2007 is expected to create a further inflow of foreign currency, thereby boosting the external reserves position and easing the pressure for the government to borrow from domestic sources to accelerate the implementation of planned infrastructure, the statement said.