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Sri Lanka's economic crisis is not over: What you need to know

Dristi Sharma
Dristi SharmaSep 23, 2022 | 17:57

Sri Lanka's economic crisis is not over: What you need to know

Sri Lanka's economic crisis doesn't seem to be ending anytime soon. The little island nation with a population of 2.19 crore is experiencing an economic disaster not seen in the last seven decades.

Sri Lanka's National Consumer Price Index (NCPI) surged to 70.2% this August, and prices of goods and groceries have touched the sky all over again. It was 66.7% in July, the Department of Census and Statistics said in a press statement.

The country has not been able to afford basic amenities like medicines, fuel, fertiliser and goods for some time now.

But before that,  

What is the National Consumer Price Index? The National Consumer Price Index (NCPI) is one of the key indicators of inflation. It measures changes in consumer prices in general. It is also used for socio-economic analysis purposes and determines monetary and income policies in any country.

Colombo Consumer Price Index (CCPI): Sri Lanka's own measurement of consumer prices, which is released at the end of each month, also rose 64.3% in August 2022. CCPI acts as a leading indicator for national prices and shows how Sri Lanka is faring when it comes to inflation.

When food becomes a luxury: In June 2022, the food inflation in Sri Lanka rose up to 80%, which made at least one-third of Sri Lankans food-deprived, according to the World Food Programme. From salt to rice, all staples were overpriced (which is not much different even now). This, in turn, caused a drastic change in the daily lifestyle and eating habits of Sri Lankans. Sri Lanka is now among the 10 countries with highest food price inflation. 

 

Lack of fertilisers: Fertiliser production going low due to lack of resources has significantly impacted crop production. Because of the low foreign reserves, exporting items like fertilisers also seems a distant dream. According to some experts, food production has nearly halved in Sri Lanka.

The situation could deteriorate further in the coming months without urgent assistance.
- United Nation's World Food Programme

What is being done?

IMF: On September 1, 2022, Sri Lanka reached a preliminary deal with the International Monetary Fund (IMF) for a 2.9-billion dollar loan. But dealing with IMF means agreeing to the policies it has for borrowing money. 

India: On September 19, 2022, India also said it had started talks with Sri Lanka on restructuring its debt and said it would also offer long-term investments.

Previously, India had provided almost 4 billion USD in financial assistance to Sri Lanka. India also deferred payment on Sri Lankan imports of about 1.2 billion dollars and offered a credit line of 55 million dollars for fertiliser imports.

Read More: To know about how Sri Lanka ended up here, click here.

Last updated: September 23, 2022 | 19:11
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