**Sri Lanka’s recovery at risk as cost-driven inflation rises**

Sri Lanka faces a new economic threat. Rising prices are now driven primarily by increasing costs rather than consumer demand. This shift could undermine the country’s fragile recovery. The International Monetary Fund’s conditions and higher living costs are squeezing households. When inflation comes from supply-side pressures—such as higher energy or import bills—it does not signal a healthy economy. Instead, it raises the risk of stagflation, where slow growth meets high prices. Analysts warn that without a rebound in demand, Sri Lanka’s rebound may stall. The central bank must balance price stability with growth, a task made harder by external debt and subsidy cuts. For now, the recovery remains on thin ice.