Debt-ridden Sri Lanka's inflation soared to a record high

ColomboEdited By: Nikhil PandeyUpdated: Apr 23, 2022, 12:53 PM IST

Sri Lankans hold a banner and placards demanding justice for the victims of the 2019 Easter Sunday attacks outside the president's office in Colombo, Sri Lanka Photograph:(AFP)

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Sri Lanka asked the International Monetary Fund this week for emergency assistance, but was told that the South Asian nation's $51 billion external debt was "unsustainable" and must be "restructured" before any help.

According to the Department of Census and Statistics, Sri Lanka's overall rate of inflation, as measured by the National Consumer Price Index (NCPI) on a year-over-year basis, was 21.5 percent in March 2022.

The National Consumer Price Index for the month of March 2022 confirmed this.

For the month of February, 2022, the headline inflation rate was 17.5 percent.

According to the government, the reported inflation for the month of March 2022 was mostly due to higher prices in both the food and non-food sectors, as compared to March 2021.

As a result, food group inflation jumped to 29.5 percent in March 2022 from 24.7 percent in February 2022, while non-food group inflation increased to 14.5 percent in March 2022 from 11.0 percent in February 2022.

When comparing month-over-month fluctuations, the NCPI grew to 172.7 in March 2022 from 167.8 in February 2022.

In comparison to February 2022, this is an increase of 4.9 index points, or 2.9 percent. This rise reflects a Rs. 1572.34 increase in the "Market Basket" expense value.

Increases in index values of food items of 1.22 percent and non-food items of 1.70 percent, respectively, contributed to the month-on-month change.

The deepening economic crisis has resulted in confrontations at nationwide protests calling for President Gotabaya Rajapaksa to resign due to mismanagement and corruption.

Sri Lanka requested emergency assistance from the International Monetary Fund this week, but was warned that the country's $51 billion external debt was "unsustainable" and needed to be "restructured" before any assistance could be provided.

The government has announced a default on its foreign debt and said precious foreign exchange will be reserved to finance essential food and medicine.

Police clashed with protesters in central Sri Lanka on Tuesday, killing one of them and wounding nearly 30.

At least eight people have also died waiting in long lines for fuel in the past six weeks.

The country's foreign exchange shortage has led to a slowing down of imports, including essentials.

Shops have rationed the quantity of rice, milk powder, sugar, lentils, and tinned fish sold to consumers.

Sri Lanka's economy has collapsed since the onset of the pandemic, with a nosedive in tourism revenue as well as foreign worker remittances.

(With inputs from agencies)