Sri Lanka has recorded its highest deflation in over six decades, with consumer prices falling by 4.0% in January 2025, marking the sharpest decline since July 1960, according to official data released on Friday. This marks the fifth consecutive month of deflation, as the country continues its recovery from its worst economic crisis in history.

At the peak of the economic meltdown in September 2022, inflation in Sri Lanka soared to a record 69.8%, leading to widespread shortages of essential goods. The deflation trend in January is largely attributed to significant reductions in electricity and fuel prices, which have contributed to the overall price drop.

Despite the deflationary period, Sri Lanka’s central bank predicts that annual inflation for 2025 will stabilize around 5.0%. The country’s economy has been under intense pressure, but efforts to restore stability include the $2.9 billion bailout loan Sri Lanka secured from the International Monetary Fund (IMF) following the 2022 financial crash.

President Anura Kumara Dissanayake, elected last year, has committed to continuing the IMF bailout program initiated by his predecessor, which involves higher taxes and reductions in government spending to stabilize the economy.

Channelstv