Food prices rise by 84.6% in Sri Lanka, inflation rises to 70%

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Colombo: Facing its worst economic crisis in seven decades, Sri Lanka’s annual inflation rate soared to more than 70% in August, with food prices rising by 84.6% from a year earlier.

The island nation of 22 million people plunged into financial and political chaos this year as it faced a shortage of foreign currencies. The country has been unable to afford major imports including fuel, fertilizers and medicine, reports BBC,

Official data released last week showed inflation rose more than 70% in August and food prices rose by 84.6% compared to a year ago.

The data further showed that the economy had contracted by 8.4% in the three months to the end of August.

The economy of the South Asian nation was heavily dependent on tourism for foreign currencies, including the US dollar. However, the rise of Covid due to border restrictions kept tourists away and had a major impact on the economy of the country.

imf loan

Earlier this month, Sri Lanka inked a preliminary agreement with the International Monetary Fund for a loan of $2.9 billion. However, the settlement also hinges on the country receiving money from private creditors, the report said.

On Tuesday, India said it has started talks with Sri Lanka on restructuring its debt and said it would also offer long-term investments. India had earlier provided financial assistance of around $4 billion to its smaller neighbour.

India deferred payment of about $1.2 billion on Sri Lankan imports and offered a $55 million line of credit for fertilizer imports.

political crisis

Sri Lanka has faced political turmoil in recent months, with the country’s president, Gotabaya Rajapaksa, fleeing abroad before resigning in July.

Thousands took to the streets to protest the sharp rise in the prices of food and fuel. Protests often took violent forms. Many Sri Lankans blame Rajapaksa’s administration for its handling of the crisis.



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