COMMENT ON THE INFLAMMATORY TRENDS FOR THE PAST 3 YEARS OF SRI LANKA Inflation can be stated as a continuous rise

in the general price level or, as a sustained fall in the value of money. Normally inflation refers to the movement in the general level of prices. It does not refer to changes in one price relative to other prices and these changes are common even when the overall level of prices is stable. The rise in the price level must be somewhat substantial and continue over a period longer than a day, week, or month. During this time, consumers and businesses act differently than they would if the economy were growing steadily. Consumers will borrow more as they will understand the loan re payments will be worth less and less as the re-payments inflation rises. Creditors will have to raise interest to maintain their profits.

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Economic and Social Infrastructure (energy sector performance)
2007 Average price of a barrel (Rs) Quantity Imported: Crude Oil (mt’000) Refined (mt’000) Value of Imports: Crude Oil (Rs mn) Refined (Rs mn) 8,113 2008 10,494 2009 7,343 2010 8,985*

1938 2216 113,584 150,390

1853 2103 143,159 1,323

2066 2135 111,715 973

1819* 2936* 120,180* 1,064* *provisional

Source: Central Bank of Sri Lanka Annual Report 2010

Inflation in Sri Lanka has been varying from single digit to double digit during the past. It had touched upon 26.15 in 1980 and reduced to a single digit later. It had been on the rise from 11.64 since 2005 and had been on the rise up to 22.56 in 2008. This was a sharp increase from 15.84 which was recorded in 2007. Adverse developments in the commodity prices contributed to the increase in the index values in the first half of 2008. The low supply of domestically produced agricultural commodities and the very high prices of imports, particularly food items, crude oil and petroleum products, in the international market contributed negatively. The upward revisions of the fuel prices, in late May 2008, too had a significant impact on the CCPI. However the improvements in the domestic supply, especially the paddy harvest in the Yala season, and the easing of commodity prices in the international market further helped the deceleration in the rate of increase in the index in the second half of the year.

Reference http://www.tradingeconomics.com/sri-lanka/inflation-cpi , “Sri Lanka Inflation rate” accessed on 17 Apr 2012 http://www.indexmundi.com/facts/sri-lanka/inflation , “Sri Lanka Inflation” accessed on 17 Apr 2012 2

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