Sri Lanka to protest IMF inflation research: Central Bank

April 08, 2008 (LBO) – Sri Lanka's central bank said it was protesting to the International Monetary Fund (IMF) after a research study said only a quarter of the country's inflation in recent years could be explained by external factors. "And I will make that comment very strongly when I go to IMF next week because I think they must also become more responsible in their actions," Central Bank governor Nivard Cabraal said.

"Because they are dealing with sovereign countries and if people make this kind of statements and these are picked up by various others and from one quote to another they do a lot of damage when it is actually not the case."

Demand Side

A statistical study by an IMF researcher based on the components of a new index covering consumer prices in Colombo over the past two years found that only a quarter of the price changes could be explained by foreign factors.

Sri Lanka's central bank blames external factors for most of the country's 23.8 percent inflation in March 2008 and also separates 'demand' driven inflation from 'supply' side factors.

Unusually for a modern central bank it claims to be responsible for only 'demand' side inflation.

Modern central banks - especially inflation t