Sri Lanka sees highest deflation in 61 years amid economic struggles

Sri Lanka experiences historic 2.1% deflation, marking the worst in 61 years

Sri Lanka recorded its highest deflation rate in over six decades, with consumer prices falling by 2.1% in November, according to official data released on Saturday. This marks the sharpest decline in inflation since 1961, reflecting the ongoing economic challenges faced by the island nation.

The country’s financial crisis, which peaked in 2022, led to severe shortages of consumer goods and inflation rates soaring to nearly 70%.

In response, Sri Lanka secured a $2.9 billion bailout from the International Monetary Fund (IMF) and implemented austerity measures, including tax hikes, to stabilize the economy.

Despite the deflation, Sri Lanka’s central bank expects inflation to remain negative in the coming months due to further reductions in energy prices and food costs. The bank also projected that inflation would eventually return to the target level of 5% in the near future.

Earlier in the year, Sri Lanka had already recorded deflation of 0.8% in October and 0.5% in September. President Anura Kumara Dissanayake, elected in September, has committed to continuing the IMF-backed economic reforms, which include raising taxes and cutting government spending.

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