According to the statistics department, Sri Lanka’s National Index of Consumer Prices (NCPI) reached a new all-time high of 73.7 percent during September compared to a year earlier, marking an acceleration from the previous month’s figure of 70.2 percent.

The annual inflation rate for food prices increased to 85.8 percent in September, up from 87 in August, while the inflation rate for prices of non-food products was 62.8 percent. The Governor of Sri Lanka’s Central Bank, Nandalal Weerasinghe, made a prognostication earlier on Thursday suggesting inflation inside this island country has reached its pinnacle and that there would likely be a slowdown in price increases this month.

The National Consumer Price Index (NCPI) measures the overall level of retailing rising prices and is published with a monthly lag of 21 days. In August, the more carefully watched Colombo (CCPI), which is published now at end of every month, showed a rise of 69.8 percent. It serves as a key indicator for national pricing and illustrates how inflation is developing in the nation’s most populous metropolis in Sri Lanka.

However, economists told Reuters that despite the higher-than-expected inflation data, it is doubtful that the central bank would boost interest rates the following month.

“Tariff increases for water and electricity that were implemented in August have spilled over into Sept. along with a tax increase for telecommunications,” said Dimantha Mathew, director of research for First Capital, an investment firm based in Colombo, when explaining the causes of the recent surge in inflation. “Tariff increases for water and energy that were implemented in August have spilled over into September,”

However, there is a minimal probability that the central bank would raise interest rates since the economy is showing signs of slowing down, and we anticipate that the rate of inflation will begin to decline to begin in October.

According to President Ranil Wickremesinghe, Sri Lanka is preparing to boost direct taxes in order to lower the deficits within the upcoming budget for 2023 & put the economy on a more secure foundation.

Because of poor economic management and the effect of the COVID-19 epidemic, Sri Lanka is now grappling with a severe shortage of dollars, which has made it difficult for the country to pay for basic imports such as food, gasoline, fertilizer, and medication.

In September, the nation came to an initial agreement with the Global Monetary Fund (IMF) for a loan of around $2.9 billion. The agreement was based on the government securing financial guarantees from governmental creditors and engaging in discussions with private creditors.

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