Sri Lanka’s inflation rate increases in August to 70.2%.

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By Creative Media News

In August, Sri Lanka’s annual inflation rate soared to almost 70% as the country grappled with its worst economic crisis in more than seven decades.

According to official statistics, food costs increased by 84.6% during the past year.

This year, the South Asian nation of 22 million people was plunged into financial and political upheaval due to a lack of foreign currencies.

The nation has been unable to afford essential imports, such as petroleum, fertilizer, and medication.

As the economy of Sri Lanka slowed last month, the Central Bank of Sri Lanka predicted that the country’s inflation rate, which peaked at approximately 70%, will decline.

Sri lanka's inflation rate increases in august to 70. 2%.
Sri lanka's inflation rate increases in august to 70. 2%.

In the three months leading up to the end of August, the economy contracted by 8.4%, according to data given by the government last week.

Before the pandemic, Sri Lanka’s reliance on tourists for foreign currency, notably the US dollar, was substantial.

However, border controls intended to slow the spread of Covid-19 deterred tourists and had a devastating effect on the economy.

Along with years of financial mismanagement, this contributed to Sri Lanka’s debt default earlier this year.

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

This occurred as tens of thousands of people went to the streets in frequently violent protests against the dramatic rise in food and fuel prices.

Many Sri Lankans criticized the administration of Mr. Rajapaksa for mishandling the crisis.

Help financially

Sri Lanka signed a preliminary agreement with the International Monetary Fund for a $2.9bn (£2.6bn) loan earlier this month. Nonetheless, the accord is contingent on the country collecting additional financing from private creditors.

Inflation rate jumps to 70. 2 in august 1
Sri lanka's inflation rate increases in august to 70. 2%.

India announced on Tuesday that it had begun discussions with Sri Lanka over the restructuring of its debt and that it would also offer long-term investments. India formerly offered about $4 billion in financial assistance to its smaller neighbor.

India also deferred payment on around $1.2 billion worth of Sri Lankan imports and extended a credit line of $55 million for fertilizer purchases.

On Friday, Sri Lankan government officials are scheduled to meet with creditors to discuss the country’s economic woes and a proposal to restructure its debts.

Analysis by the India business correspondent Arunoday Mukherji

Sri Lanka is among the 10 nations with the highest food inflation worldwide.

Experts have cautioned that Sri Lanka’s economic troubles may persist for some time as a result of rising food costs.

The country’s food security remains a major worry, particularly because the lack of foreign currency has had a considerable impact on agricultural production and fertilizer shortages. Some estimates indicate that food output has decreased by around half.

Due to the country’s diminishing foreign exchange reserves, importing huge quantities of food is also not an option.

The UN’s World Food Programme stated earlier this week that “the situation could worsen in the coming months without immediate assistance.

The first shipment of 600 tonnes of rice worth $15 million has arrived from Australia as part of a scheme to assist Sri Lanka.

It is a portion of a larger shipment of rice, lentils, and cooking oil that will shortly arrive in the country.

The goal is to assist approximately 3,4 million of the 22 million worst-affected individuals in the nation.

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