Sri Lanka’s Inflation Hits a Record High of 39% in May Amidst Tax Hikes

Sri Lanka’s headline inflation surged to a record in May amid continuing food and fuel shortages as the country struggles to lift itself out of its worst economic crisis.

Consumer prices in the capital Colombo rose 39.1% from a year ago, the Department of Census and Statistics said in a statement . That’s faster than the median 35% climb forecast by economists in a Bloomberg survey and is the highest level on record.

Food inflation surged 57.4%, while prices of non-food items jumped 30.6%, the data showed.

The Central Bank of Sri Lanka, which this month left borrowing costs steady while letting previous increases filter through the economy, had predicted price gains to touch 40% amid a shortage of essentials in the absence of dollars to pay for imports.

Sri Lanka Hikes Taxes, Reaches out to Imf for Help

The inflation figures were released the same day that the cabinet reversed the 2019 tax cuts, which have been blamed for ruining the country’s finances and setting it on course toward its current crisis.

The country, battling its worst economic crisis since independence, needs $4 billion in emergency funds this year but a deal with the International Monetary Fund for rapid aid remains still in the works. 

A sharp fall in the Sri Lankan rupee and heightened global uncertainty also stoked prices. After having lost more than 40% following a devaluation in March, the currency has slowed its decline against the dollar since mid-May. 

Read also; SriLankan Airlines Increases Flights between Nairobi & Colombo.

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