Sri Lanka’s inflation zooms to 69.8% in Sept amid worst economic crisis

Sri Lanka’s inflation has set a new record of 69.8 per cent in September, up from 64.3 per cent a month earlier, data from the state statistics office said on Friday, highlighting the challenge for the central bank as the island reels under its worst economic crisis in seven decades.

The Colombo Consumer Price Index (CCPI), a leading indicator that gauges inflation in Sri Lanka’s biggest city, rose 69.8 per cent from a year ago, from 64.3 per cent in August.

The contribution from the food sector was 30.82 per cent in September, the statistics department said.

Based on the CCPI, the moving average inflation in September was 33.4 per cent over 28 per cent recorded in August.

Most basic food items other than rice and eggs had seen increases. The government recently hiked utility services rates of water and electricity alongside the high cost of food.

Import restrictions imposed in the ongoing economic crisis have caused scarcities. The worsening foreign exchange crisis in April caused the government to announce debt default.

The International Monetary Fund staff-level agreement to be reached soon for a USD 2.9 billion facility is hampered by the need to restructure debt.

On September 1, the IMF announced that it will provide Sri Lanka with a loan of about USD 2.9 billion over a four-year period to help the island nation overcome the unprecedented economic turmoil.

Sri Lanka is facing the worst economic crisis since independence in 1948, which has led to an acute shortage of essential items like food, medicine, cooking gas and fuel across the country.

The severe economic downturn, weak Sri Lanka revenues, rising health expenditure and energy needs led to a worsening of the fiscal situation.

While the decline in growth partly led to shrinking revenues, Sri Lanka had to increase spending to safeguard its population from a double-pronged health and energy crisis, primary balance, revenues and expenditures.

In mid-April, Sri Lanka declared its international debt default due to the forex crisis.

The country owes USD 51 billion in foreign debt, of which USD 28 billion must be paid by 2027.

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