Sri Lanka rupee strength helps rein in inflation: CB

Jan 03, 2011 (LBO) - The strengthening of the Sri Lanka rupee helped rein in inflation which was kept at a mid-single digit level in 2010, the central bank said in a statement. The average domestic prices of wheat flour and milk powder decreased while the price of sugar increased compared to 2009. The Sri Lankan rupee appreciated by about 1.7 per cent against the US dollar on average in 2010 and is now around 112 to the greenback.

However exporters have been complaining that the strength of the rupee has been eroding their competitiveness in overseas markets.

"The impact of high import prices on consumer prices was somewhat mitigated by the slight appreciation in the exchange rate," the central bank said.

The island's year-on-year inflation stood at 6.9 percent in December 2010 while the annual average rate of inflation, as measured by the Colombo Consumers’ Price Index (CCPI), was 5.9 percent in 2010.

"It is noteworthy that this is the second lowest annual average inflation rate observed since 1999," the central bank said.

"Prudent monetary policy also supported preventing inflation from rising."

The central bank said that in the inter