Colombo: Facing its worst economic crisis in over seven decades, Sri Lanka’s annual inflation rate surged to more than 70% in August with food prices rose by 84.6% compared to a year ago.
The island nation of 22 million people was plunged into financial and political chaos this year as it faced shortage of foreign currencies. The country has been unable to afford key imports – including fuel, fertiliser and medicine, reports BBC.
Official data, released last week, showed that inflation surged more than 70% in August and food prices rose by 84.6% compared to a year ago.
The figures further showed that the economy had contracted by 8.4% in the three months to the end of August.
The South Asian nation’s economy was heavily reliant on tourism for foreign currencies, including the US dollar. However, due to border restrictions following Covid upsurge kept tourists away and took a major toll on Country’s economy.
IMF loan
Earlier this month, Sri Lanka reached a preliminary deal with the International Monetary Fund for a $2.9bn loan. However, the agreement hinges on the country also receiving funds from private creditors, the report said.
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 $55mn for fertiliser imports.
Political crisis
Sri Lanka has faced political upheaval in recent months, with the country’s president Gotabaya Rajapaksa fleeing abroad before resigning in July.
Thousands of people came on streets to protest against sharp increases in food and fuel prices. The protests often took violent turns. Many Sri Lankans’ blame Rajapaksa’s administration for mishandling the crisis.
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