Commerce

Sri Lanka’s inflation rate jumps to 70pc in August

Friday, September 23rd, 2022 08:02 | By
Sri Lanka’s inflation rate jumps to 70pc in August
Sri Lanka’s inflation rate jumps to 70pc in August. PHOTO/Courtesy

Sri Lanka’s annual inflation rate surged to more than 70 per cent in August as it struggles with its worst economic crisis in over seven decades.

Official data also showed food prices rose by 84.6 per cent compared to a year ago.

The South Asian nation of 22 million people was plunged into financial and political chaos this year as it faced a shortage of foreign currencies.

The country has been unable to afford key imports - including fuel, fertiliser and medicine. Last month, the Central Bank of Sri Lanka said it expected inflation to ease, as the country’s economy slowed, after peaking at 70pc.

Official figures released last week showed that the economy had contracted by 8.4pc in the three months to the end of August. Before the pandemic, Sri Lanka was heavily reliant on tourism for foreign currencies, including the US dollar.

However, border closures aimed to slow the spread of Covid-19 kept tourists away and took a major toll on the country’s economy.

That, along with years of financial mismanagement, led to Sri Lanka defaulting on its debts earlier this year.

The country has faced political upheaval in recent months, with President Gotabaya Rajapaksa fleeing abroad before resigning in July.

That came as hundreds of thousands of people took to the streets, in protests that often turned violent, over a sharp increase in food and fuel prices. Many Sri Lankans blamed Rajapaksa’s regime  for mishandling the crisis.

Earlier this month, Sri Lanka reached a preliminary deal with the International Monetary Fund for a $2.9bn (£2.6bn) loan. But the agreement hinges on the country also receiving funds from private creditors.

On Tuesday, India said it had started talks with Sri Lanka on restructuring its debt and said it would also offer long-term investments.

India previously provided almost $4bn in financial aid to its smaller neighbour.

India also deferred payment on Sri Lankan imports of about $1.2bn and offered a credit line of $55m for fertiliser imports.

Sri Lankan government officials are due to meet creditors on Friday, to discuss the extent of the country’s economic problems and a proposal to restructure its debts. -

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