Inflation Skyrockets In Sri Lanka, Food Prices At Record High Amidst Severe Foreign Exchange Crisis

Sri Lanka’s benchmark inflation rate, measured by the National Consumer Price Index, accelerated to 14 per cent in December 2021, up from 11.1 per cent, the government statistics office said on Saturday, amidst a severe a foreign exchange crisis.

This was for the second consecutive month after inflation recorded double digit growth for the first time in November since the index came to be compiled from 2014.

Food prices jumped 6.3 per cent while non-food prices rose 1.3 per cent in December, according to the National Consumer Price Index.

“The food sub-index was up 21.5 per cent in 12 months to December 2021, while non-foods also rose 7.6 per cent in the months,” the statistics office said in a statement.

As soon as the Covid-19 pandemic broke out in 2020, the government imposed import restrictions to try and stop dwindling of foreign reserves.

Sri Lanka currently banks on the Indian economic assistance with credit lines being made available to finance fuel and food imports.

The island nation is currently facing a severe foreign exchange crisis with falling reserves.

The country is grappling with a shortage of almost all essentials due to the lack of dollars to pay for the imports.

Additionally, power cuts are imposed at peak hours as the state power entity is unable to obtain fuel to run turbines.

The state fuel entity has stopped oil supplies as the electricity board has large unpaid bills. The only refinery was recently shut as it was unable to pay dollars for crude imports.

Early this month, the Indian government announced a billion-dollar assistance package in addition to other balance of payment support to Sri Lanka.

The billion-dollar loan credit facility is to be used to avert a food crisis while allowing for the import of items and medicines. Additionally, there will be USD 500 million for importing fuel from India.

The Sri Lankan government is also in talks with China to overcome the current financial crisis. During the visit of Chinese Foriegn Minister Wang Yi to Colombo earlier this month, President Gotabaya Rajapaksa requested Beijing’s assistance in mitigating his country’s deepening forex crisis and spiralling external debt, saying it will help Colombo to the best of its capacity.

(This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.)