Sri Lanka inflation hits a record 39% as food shortages continue
Agencies
COLOMBO: Sri Lanka’s headline inflation surged to a record in May amid continuing food and fuel shortages as the country struggles to lift itself out of its worst economic crisis.
Consumer prices in the capital Colombo rose 39.1% from a year ago, the department of census and statistics said in a statement on Tuesday. Food inflation surged 57.4%, while prices of non-food items jumped 30.6%, the data showed.
The Central Bank of Sri Lanka, which this month left borrowing costs steady while letting previous increases to filter through the economy, had predicted price gains to touch 40% amid a shortage of essentials in the absence of dollars to pay for imports.
The inflation figures were released the same day that the cabinet reversed the 2019 tax cuts, which have been blamed for ruining the country’s finances and setting on course toward its current crisis. The country, battling its worst economic crisis since independence, needs $4 billion in emergency funds this year but a deal with the International Monetary Fund for rapid aid remains still in the works.
A sharp fall in the Sri Lankan rupee and heightened global uncertainty also stoked prices. After having lost more than 40% following a devaluation in March, the currency has slowed its decline against the dollar since mid-may.
The country asked farmers to plant more rice as part of plans to avert a severe food shortage, a top official said on Tuesday, as experts warned of a 50% drop in production that would worsen the impact of its financial crisis.
“It is clear the food situation is becoming worse. We request all farmers to step into their fields in the next five to ten days and cultivate paddy,” agriculture minister Mahinda Amaraweera said on Tuesday.
Sri Lanka’s new prime minister Ranil Wickremesinghe has warned of a severe food shortage by August and estimates $600 million will be needed to import fertiliser, which the country is struggling to raise.