Sri Lanka inflation falls despite rising oil prices in April as money printing tapers off

April 30, 2007 (LBO) – Sri Lanka's inflation fell for the third month in a row in April after the Central Bank stopped printing money to finance the budget deficit and tightened monetary policy from December 2006. Consumer price increases in the past twelve months measured by the Colombo Consumer Price index fell to 16.3 percent in April from 19.5 percent in March, the government's statistics office said.

The index fell marginally by 4.2 points in absolute terms to 5025.4 points in April.

The index has flattened despite an increase in diesel and petrol during the month.

In the past Sri Lanka's economic managers have printed billions of rupees to finance the fiscal deficits and conveniently blamed the resulting inflation and balance of payments difficulties on oil prices.

The index has fallen steadily from a peak of 5184.3 points in January when inflation rose to 20.5 percent as the Central Bank printed 38.5 billion rupees to finance the budget.

Economists point out that raising oil prices and preventing the build-up of pressures within the financial system is essential to reduce high monetary inflation.

Meanwhile, seasonally adjusted inflation which is an average smoothed over 24 mon