By Omotosho Victor Fiyinfoluwa(SIWES student, Federal Polytechnic Ado-Ekiti)
Official data revealed a more than six percent surge in prices in Sri Lanka last month, spurred by tax increases aligned with IMF conditions to secure a $2.9 billion bailout loan.
The Central Bank of Sri Lanka reported Thursday that the 6.4 percent spike exceeded December’s 4.0 percent, although it remained significantly lower than the levels during the island’s recent financial crisis.
The bank attributed the January 2024 inflation acceleration to tax adjustments at the month’s outset and disruptions in food supply due to adverse weather conditions.
Food inflation soared to 3.3 percent in January, compared to 0.3 percent in the previous month, following the implementation of levies on goods and services.
Starting in January, the government raised the value-added tax from 15 to 18 percent and eliminated exemptions on a significant number of goods and services, further driving up prices.
Sri Lanka continues to recover from its severe economic downturn in 2022, marked by a government default on its $46 billion foreign debt and inflation peaking at nearly 70 percent.
The resulting turmoil prompted widespread protests, leading to the resignation of then-president Gotabaya Rajapaksa in July of that year.
In December, the International Monetary Fund reinstated its $2.9 billion bailout for Sri Lanka following a debt restructuring agreement with China, its largest official creditor. The IMF’s conditions included increasing revenue to stabilize the economy.
