Food inflation in Sri Lanka hits a record 25%
COLOMBO (Reuters) – Food inflation in crisis-hit Sri Lanka hit a record high of 25% in January, the statistics bureau said on Tuesday, with poor harvests and difficulties in financing imports leading to widespread shortages. .
The island nation’s economy has collapsed since the start of the pandemic, with collapsing income from tourism leaving traders unable to finance purchases of essential goods overseas.
Last year, the government banned the import of agricultural chemicals in a desperate attempt to bolster foreign exchange reserves, drastically reducing crop yields and prompting many farmers to leave their fields bare.
Supermarkets rationed rice, lentils and other basic necessities, while power companies unable to pay for imported fuel were forced to impose blackouts.
January’s food inflation figure was the fourth consecutive record rise and nearly double October’s figure of 12.8%.
Headline inflation as measured by the Colombo Consumer Price Index (ICCP) also hit a record high of 14.2% in January.
The government lifted its import ban on agrochemicals in October after intense protests from farmers, but banks are still short of dollars to finance imports.
Sri Lanka was banking on a post-pandemic recovery in tourist arrivals to help replenish its foreign exchange coffers.
But a resurgence of the coronavirus in the form of the highly contagious variant of Omicron has dashed those hopes, with authorities now predicting just over a million foreign holidaymakers this year.
International rating agencies downgraded Sri Lanka because it was expected to be unable to service its $35 billion external debt.