Sri Lanka records sharp inflation drop

COLOMBO: Sri Lanka’s inflation moderated to 6.3 percent in July, official figures showed Monday, its lowest rate in nearly two years, AFP reported.

The island’s worst-ever economic turmoil saw widespread shortages and the ouster of its president, with inflation peaking at 69.8 percent last September.

But it has fallen since then, reaching 12.0 percent in June before dropping further in July, when data from the department of Census and Statistics showed a decline in food prices.

Sri Lanka defaulted on its $46 billion foreign debt in April 2022 and many of its 22 million people endured months of food, fuel and medicine shortages.

The foreign exchange shortage has somewhat eased since, with the government securing a $2.9 billion bailout from the International Monetary Fund in March.

Last month, the government unveiled a debt restructuring plan which offered a 30 percent haircut for international sovereign bondholders, who account for more than a quarter of Sri Lanka’s outstanding foreign obligations.

The IMF said last month that Sri Lanka’s economy showed “tentative signs of improvement” but warned Colombo still needed to pursue painful reforms.

Last year’s economic crisis sparked months of civil unrest which eventually toppled then-president Gotabaya Rajapaksa.

His successor Ranil Wickremesinghe has doubled taxes, removed generous subsidies on energy and sharply raised prices to shore up state revenue.