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Thursday, April 18, 2024

Sri Lanka, which is starved for cash, has been struck by unprecedented inflation

Official statistics released on Tuesday indicated that Sri Lanka’s inflation reached a record high for the fourth consecutive month, as the country’s economic situation, which is being exacerbated by a crushing foreign currency shortage, worsened.

The National Consumer Price Index (NCPI) increased 16.8 percent from a year earlier in January, marking the fourth straight record increase and more than double the 8.3 percent increase recorded in October.

While the South Asian island is struggling to obtain money to fund basic imports such as food, gasoline, and medications, the record highs occurred as a result of the record highs.

The Energy Ministry said on Monday that it was having difficulty purchasing gasoline on credit and that there were shortages at numerous pumping stations, resulting in long lines and the closure of others.

According to the Ministry, the primary state-owned oil business, the Ceylon Petroleum Corporation, was burdened with $3.5 billion in outstanding debt and was no longer able to acquire additional commercial loans to meet its obligations.

Officials from India’s biggest petroleum business said they were relying on a projected $500 million credit line from the Indian government to acquire oil in the coming months.

The Supreme Court of India on Tuesday struck down a new tax law that sought to gather an extra 50 billion rupees ($250 million) in revenue this year, dealing another blow to the government’s efforts to raise much-needed funds.

Specifically, the court decided that the Special Goods and Services Tax — which would have authorised the finance minister to establish tax rates and taxing sectors — was an unconstitutional usurpation of the financial powers of parliament.

When it comes to requesting a bailout from the International Monetary Fund, Sri Lanka’s cabinet is split. Meanwhile, the opposition has asked for a restructure of the country’s $35 billion external debt in order to alleviate the country’s foreign cash shortfall.

In response to the deepening economic crisis, retailers have already begun to ration food supplies, limiting the amount of rice, milk powder, sugar, lentils, and canned fish that may be sold to customers.

Many gas stations in the provinces have also implemented rationing of the gasoline they sell to motorists.

Since the outbreak of the epidemic, Sri Lanka’s economy has crumbled, with both tourist earnings and remittances from overseas workers taking a tumble as a result.

International rating agencies have downgraded Sri Lanka due to concerns that the country may be unable to pay its foreign debt in the future. The administration maintains that it is capable of meeting its duties.

David Faber
David Faber
I am a Business Journalist of The National Era
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