With global oil prices touching almost $ 80 a barrel, triggered by renewed tensions in the Middle East world commodity prices are said to further rise making import costly across nations, economist warned.
Higher oil prices and a weak rupee is a double whammy on imports to Sri Lanka which outdoes exports widening the trade deficit each year. Economists and trade experts have cautioned further weakening of the currency would have ramifications to higher inflation and negative implications on the economy.
Professor of Economics, University of Colombo, Sirimal Abeyratne said there is an upward trend in global commodity prices, due to rising oil prices and Iran’s nuclear issue, trade tensions with US - China policies as well as consumer speculations in the US over inflation and interest rates.
“Oil prices, I guess, already hits $77 in New York. Sri Lanka’s inflation already got accelerated for few months now; higher oil prices and weak rupee would increase pressure on the prices more”.
The fuel pricing formula is needed to ease the burden of fuel price volatility on the government budget. Formula is immediately needed as our domestic fuel prices should reflect the world market prices.
Global oil prices are expected to average $ 65 a barrel over 2018 up from $ 53 a barrel last year due to strong demand from consumers and supply cuts by producers.
Metal prices are expected to rise nine percent this year on a pick up in demand and supply constraints according to the World Bank.
Prices of energy commodities comprising oil, natural gas, and coal are forecast to jump 20 percent this year.
Agricultural commodities including food items and raw materials are too expected to record a two percent rise according forecast.
Sri Lankan rupee which reached Rs.159 a US$ on Friday has depreciated by around 2 percent so far this year, 2.00 percent last year and 3.9 percent in 2016.
Inflation which went beyond the single mid digit level this year is expected to remain at the single mid digit level towards the end of the year according to the Central Bank. - LF