Sri Lanka inflation hits 38-month high

Sri Lanka’s inflation hit a 38-month high of 8.0 percent as prices of food and other essentials rose across the board, the government’s statistics office said on Monday.

The annual inflation rate in August compared with 7.3 percent last month and 1.2 percent a year ago, according to the Department of Census and Statistics.

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“This month’s inflation was mainly driven by increases in the price index for transport, housing, water, electricity, gas and other fuels,” the department said.

Sri Lanka has hiked fuel prices by about half since the Middle East war triggered a surge in global energy prices in the import-dependent nation.

The island recorded deflation of 0.3 percent in July 2025, and prices have risen steadily since then.

Sri Lanka has warned that any prolonged conflict in the Middle East could threaten its fragile economic recovery from the meltdown of 2022, when the country ran out of foreign exchange to finance essential imports.

The government told the International Monetary Fund (IMF), which approved a $2.9 billion bailout for Colombo in March 2023, that sustained high energy prices could undermine efforts to recover from the country’s worst economic crisis.

Under the IMF-backed reforms, Sri Lanka is required to ensure cost recovery in fuel and electricity pricing while limiting subsidies that strain public finances.

Sri Lanka defaulted on its $46 billion foreign debt in 2022. Colombo has been drawing down the IMF bailout loan to stabilise the country since then.