Sri Lanka’s inflation jumps to 70.2% amidst worst-ever economic crisis

The National Consumer Price Index (NCPI) which determines how much people spend on a selected basket of goods and services grew 2.5 per cent in August with food prices rising 1.7 per cent and non-foods rising 3.2 per cent.

The non-food inflation surged to 57.1 per cent in August from 52.4 per cent in July as there was a sharp hike in electricity tariffs.

However, the monthly prices eased to 3.2 per cent, from 6.7 per cent in July.

The core prices measured, leaving the volatile items such as food, energy and transport accelerated in August to 60.5 per cent, from 57.3 per cent in July.

According to official data, food prices have risen by 84.6 per cent, compared to 82.5 per cent in July while the changes in prices measured monthly, decelerated to 1.7 per cent, from 4.6 per cent in July.

Earlier this month, the electricity tariff was revised which along with the soaring food prices led to the increase in the national index of consumer prices for August.

According to tax experts, the 15 per cent Value Added Tax and 2.5 per cent Social Security Contribution Levy could contribute to further price increases by at least 22 per cent.

Based on the inflation forecasts, Sri Lanka’s Central Bank said last month that the prices could peak in September before starting to ease thereafter if the global commodities prices remained stable.

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.

As per the latest World Bank assessment, Sri Lanka ranks 5th in the highest food price inflation in the world. It is ranked behind Zimbabwe, Venezuela, and Turkey, while Lebanon leads the list.

The country of 22 million people has been battling shortages of essentials, including fuel, food and medicines, for months after its foreign exchange reserves dropped to record lows, stalling imports and stoking unprecedented public unrest.

The anti-government protests earlier this year forced President Gotabaya Rajapaksa to flee the country in July. He returned to Colombo earlier this month after a new government was formed under President Ranil Wickremesinghe and the anti-government protests subsided.