Cyclone Ditwah Set to Further Weaken LKR and Push Inflation Higher
- Chalani Himasha
- Jan 4
- 1 min read
Himasha Dissanayake, JadeTimes Staff
H. Dissanayake is a Jadetimes news reporter covering Economy
Cyclone Ditwah and the resulting widespread flooding across Sri Lanka are poised to trigger significant economic setbacks, with analysts warning of further depreciation of the Sri Lankan rupee (LKR) and a sharper-than-expected rise in inflation.
A recent Economic Update by CT Smith Stock Brokers highlights that the cyclone’s destruction—particularly across key agricultural zones—will create immediate upward pressure on food prices. “We expect immediate pressure on price levels, especially food prices,” the report stated. The month of December is already known for elevated prices due to the festive season, and this year’s conditions could drive inflation well beyond the earlier forecast of 3.5% to 4.0%.
The report further cautions that Sri Lanka may be forced to increase imports of essential consumables over the coming weeks, a move that would worsen the strain on the already fragile currency.
The rupee has been on a downward trajectory since December 2024, with the pace of depreciation intensifying in recent weeks. According to CT Smith, the LKR weakened by 1.3% over the past month, driven by reduced forex market liquidity and heightened demand for imports following the cyclone.
Economists warn that unless domestic supply chains stabilize quickly, Sri Lanka could face a prolonged period of inflationary pressure and continued currency volatility.
Comments