Sri Lanka records highest deflation since 1961

An unprecedented financial crash in 2022 brought months of consumer goods shortages, with inflation peaking at nearly 70% that year.

Since then, a $2.9 billion bailout loan from the International Monetary Fund, tax hikes and other austerity measures have slowly made headway in repairing the island's economy.

"Headline inflation will remain negative in the next few months, deeper than previously projected, mainly due to larger downward adjustments in energy prices and reduction in volatile food prices," Sri Lanka's central bank said in a statement.

The bank said inflation was likely to return to its target level of 5% in the coming months.

Sri Lanka had already seen deflation of 0.8% in October and 0.5% in September.

President Anura Kumara Dissanayake, who was elected in September, has vowed to maintain the IMF bailout programme negotiated by his predecessor that includes higher taxes and cuts to state spending.