Sri Lanka Inflation Holds at 2.1% in December

Annual inflation in Sri Lanka’s capital, Colombo, rose to 2.3% in January 2026, the highest level since July 2024, up from 2.1% in December. Food inflation edged up to 3.3% from 3.0% in both November and December, despite the impact of November’s cyclone and subsequent floods, which caused significant damage to crops and infrastructure. Higher prices for sea fish, milk powder, chicken, and dried fish were partially offset by a decline in rice. Non-food inflation remained at 1.8% for the second consecutive month, driven by increases in housing and utilities, restaurants and hotels, education, health, and clothing and footwear, while transport prices fell. On a monthly basis, inflation slowed to 0.6% from 1.2% in December.

Sri Lanka’s annual inflation in the capital, Colombo, remained unchanged at 2.1% in December 2025, its highest level since July 2024 but below market expectations of 2.4%. This marks the third consecutive month at this level. Food prices contributed 0.97 percentage points to the annual increase, led by coconuts (+0.28 pp), milk powder (+0.28 pp), vegetables (+0.44 pp), sea fish (+0.40 pp), and coconut oil (+0.13 pp), while rice, big onions, dhal mysoor, yoghurt, and sugar saw notable declines. Non-food categories added 1.18 points, with education (+0.27 pp), restaurant and hotel services (+0.26 pp), health (+0.19 pp), furnishings and maintenance (+0.12 pp), and clothing (+0.11 pp) as main contributors. Downward pressures came from petrol (-0.20 pp) and electricity (-0.19 pp). On a monthly basis, consumer prices rose 1.2% in December, rebounding from a 0.2% decline in November.

The annual inflation rate in Sri Lanka’s capital, Colombo, was unchanged at 2.1% in November 2025, remaining at its highest level since July 2024 but below market expectations of 2.5%. Food prices contributed 0.95 percentage points to the annual increase, while non-food categories added 1.14 points. Within food, the biggest upward effects came from coconuts (+0.63 pp), milk powder (+0.26 pp), limes (+0.34 pp), sea fish (+0.16 pp), and coconut oil (+0.15 pp), while notable declines were recorded in rice, eggs, yoghurt, big onions, and sugar. Among non-food items, key contributors included education (+0.27 pp), restaurant and hotel services (+0.25 pp), housing rent (+0.22 pp), private medical fees (+0.09 pp), and clothing (+0.11 pp). Downward pressures were seen in electricity (-0.20 pp), petrol (-0.21 pp), and areca nuts (-0.06 pp). On a monthly basis, consumer prices fell 0.2%, reversing a 0.1% increase in the previous period.