The price of food in Sri Lanka climbed by a record 22.1 percent in December, according to official numbers released on Saturday, as the country tries to finance urgent imports to alleviate a severe shortage of basic commodities.
According to the Department of Census and Statistics, food inflation reached an all-time high last month on a year-on-year basis for the first time since the Colombo Consumer Price Index (CCPI) was introduced in 2013. According to the department, the price rises in December were higher than the previous record of 17.5 percent set in November, which was the previous high. It went on to say that overall inflation reached a record high of 12.01 percent in December, the highest level recorded since the CCPI index was established.
However, there were no specific plans to address the crushing foreign exchange situation in the president’s New Year’s message, which professed optimism about restoring the cash-strapped economy but was devoid of any specific plans to address it. In his remarks, he expressed confidence that the new year will provide an opportunity to build on the actions made by the government to seek and conquer problems, as well as to develop the people’s economy. Sri Lanka has been downgraded by international rating agencies, which are concerned about the country’s capacity to service its $26 billion in foreign debt.
Earlier this week, the government hiked the price of milk powder by 12.5 percent, following a similar increase in fuel prices earlier in the month. The pandemic has had a devastating impact on the island’s tourism-dependent economy, and the government has been obliged to enforce a sweeping import embargo in order to shore up foreign exchange reserves.
Rationing of milk powder, sugar, lentils, and other staples has been occurring in supermarkets for several months as commercial banks have run out of cash to pay for imports. A senior agriculture official issued a warning last month about an impending famine and urged the government to create an orderly food rationing programme in order to avert a situation similar to that described above. The appeal was denied, and he was dismissed within hours after filing it.
Because of severe crop failures and intense farmer protests, the government’s ban on pesticide imports has exacerbated food shortages. The prohibition was removed in November following widespread crop failures and intense farmer protests.
As of the end of November, Sri Lanka had foreign reserves of $1.58 billion, a significant decrease from the $7.5 billion it had when Rajapaksa entered office in 2019.