COLOMBO: Sri Lanka’s inflation hit a 22-month low in December, official figures showed, a day before a steep 12 percent sales tax on supermarket purchases takes effect.

Figures from the Central Bank of Sri Lanka showed year-on-year inflation dipping to 4.7 percent, the lowest since February 2012 when it was 2.7 percent.

There was no immediate comment from the bank on the dramatic slowdown, with the inflation rate a year ago at 9.2 percent.

However, a new value-added tax expanded to cover the retail trade, including supermarkets, takes effect from Wednesday in line with the government’s budget for 2014 and is likely to push up prices.

Imports will also cost more due to changes in customs duty calculations, and telephone calls will go up by five percent after a tax increase on the fast growing communications industry.

A two percent tax on the turnover of banks and financial institutions will also go into force from Wednesday as the government struggles to curtail the budget deficit to 5.2 percent of GDP in 2014, narrower than the 5.8 percent deficit in 2013.

President Mahinda Rajapakse who is also the finance minister told parliament in November that he expected the economy to grow 7.5 to 8.0 percent in calendar 2014, up from an estimated 7.0 percent in 2013 and 6.4 percent in 2012.

The economy recorded 8.0 percent-plus growth for two straight years after troops crushed separatist Tamil Tiger rebels in May 2009, but growth has slipped since.