Authorities make key observations as inflation hits 7.9%

Authorities make key observations as inflation hits 7.9%

Authorities make key observations as inflation hits 7.9%

Written by Mayooran Kantharvel

23 Sep, 2017 | 9:39 pm

Sri Lanka’s inflation rate for August has risen to 7.9 percent.

According to the Department of Census and Statistics, the country’s inflation rate in July stood at 6.3 percent.
Inflation is the rate at which the prices of general goods and services rise with time. The Department of Census and Statistics says the rise in the prices of food items has had an impact on the inflation rate in the country.

Statistics released by the department reveal that the prices of coconuts, potatoes, dried sprats, big onions, green chillies,
lime, tea leaves, bananas and mangoes increased during this time period.

During the month of August, the prices in the sectors of health services, alcohol, tobacco, home furniture, domestic maintenance, transport, textiles, footwear and education increased.

The Department further notes the prices of housing, water, electricity, LPG and other fuels as well as telecommunications increased during this time period.

Economist Dr. Harsha de Silva, speaking on the issue said:

“The price of the basket of goods used by the people in this country has increased by 7.9 percent, when compared from August 2016 to August 2017. There are two groups of items in this basket. One is food items. The other is non-food items, and that includes education, health, telephone and transport. The prices of food items have inflated by about 12.5 percent, while prices of non-food items have inflated by around 4 percent. So, what we can see is an issue with prices of food items. As a short term measure, we are trying to solve the supply issue of food items.

Meanwhile, Dr. Priyantha Dunusinghe, Senior Lecturer,Economic Management Unit of the Colombo University, says:

‘The main problem is rise in interest rates. Due to high interest rates, there may be difficulties in repayment in the short term. Further difficulties may arise when the loans are not invested in profitable economic activities. Thereby, when it comes to repaying the loans, difficulties would arise in accumulating funds. In the recent past, one of the main things we saw in the country’s economy is low income generation by the government, and high levels of national borrowings. This has resulted in the government imposing a number of new taxes, or increasing the rates of taxes. By obtaining commercial loans, what happens is a domino effect. This results in the tax burden on the public increasing, which results in the increase in the prices of goods and services, and this in turn causes the rate of inflation to increase. This situation occurs when the government increases taxation in order for them to repay their loans. In the recent past, the main cause for inflation was the government imposing taxes on goods and services which caused their prices to increase drastically.

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