Inflation in Sri Lanka soars nearly 40% as shortages persist

(Bloomberg) – Sri Lanka’s headline inflation rose more than expected in May amid persistent food and fuel shortages, even as the country struggles to emerge from its worst economic crisis.

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Consumer prices in the capital Colombo were up 39.1 percent from a year ago, the Census and Statistics Department said in a statement on Tuesday. That was faster than the median 35% climb forecast by economists in a Bloomberg survey and the highest on record.

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

Sri Lanka’s central bank has kept borrowing costs steady this month while letting previous growth seep into the economy, forecasting a 40% rise in prices due to shortages of essential goods without the dollar to pay for imports.

A sharp drop in the Sri Lankan rupee and heightened global uncertainty also pushed up prices. The currency’s losses against the dollar have slowed since mid-May after falling more than 40% after depreciating in March.

The country is battling its worst economic crisis since independence and needs $4 billion in emergency funding this year, but a fast-track aid deal with the International Monetary Fund remains a long way off. Access to the IMF’s aid requires structural reforms, such as higher taxes and spending cuts, that could further exacerbate the suffering of its citizens.

(Updated with food and non-food inflation details in third paragraph.)

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