Sri Lanka minister warns crisis will worsen as inflation hits record high

Sri Lanka’s unheard of shortages of meals, fuel, and essential drugs will worsen earlier than a global bailout is negotiated, its finance minister warned Friday as inflation hit some other record excessive.

Ali Sabry, who is in Washington for talks with global lenders, said an IMF bailout may additionally take months, however, he becomes in search of about $2.5 billion in emergency assistance from others.

“It is going to get worse before it gets better,” Sabry told reporters in an online press conference. “It is going to be a painful few years ahead.”

However, he added that he was optimistic Sri Lanka could “come out of this strong and we may not even have to go for an IMF program ever again.”

His remarks came as official data showed Sri Lanka’s inflation hit a record high for the sixth consecutive month as the country was gripped by shortages never experienced before.

The statistics office said the broad-based National Consumer Price Index (NCPI) rise 21.5 percent year-on-year in March, more than four times the 5.1 percent inflation of a year earlier.

Food inflation in March stood at a whopping 29.5 percent, the highest ever.

The figures are likely to rise further: the state-run oil company has subsequently raised the price of diesel, commonly used in public transport, by 64.2 percent.

The worsening economic woes have led to clashes at nationwide demonstrations calling on President Gotabaya Rajapaksa to step down over mismanagement and corruption.

Sri Lanka tapped the International Monetary Fund this week for emergency assistance but was told that its external debt was “unsustainable” and must be “restructured” before any help.

“Approval of an IMF-supported program for Sri Lanka would require adequate assurances that debt sustainability will be restored,” the IMF said.

The government last week announced a default on its external debt and said precious foreign exchange will be reserved to finance essential food and medicines.

Sabry said he admitted to the IMF that Sri Lanka’s recent economic blunders in slashing taxes worsened the crisis and that Colombo should have sought its help much earlier.

“We have accepted our mistakes… There is no denying the fact that we are facing the worst financial crisis in the history of our country,” he said.

Sabry added that Colombo will move for debt restructuring as demanded by the IMF and in the meantime tap neighboring India for more credit lines to import fuel and other essentials.

He became additionally hopeful of having “approximately $500 million” from the World Bank to import meals and cooking gas inside the next 4 months, he said.

Sri Lanka will also flip to other key bilateral lenders – China and Japan – to deal with the disaster of foreign exchange.

The acute shortages have led to widespread discontent. Police clashed with protesters in important Sri Lanka on Tuesday, killing certainly one of them and wounding nearly 30.

At least eight humans have also died waiting in long traces for fuel in the past six weeks.

The U.S’s forex scarcity has brought about a slowing down of imports, inclusive of necessities.

Shops have rationed the amount of rice, milk powder, sugar, lentils, and tinned fish offered to clients.

Sri Lanka’s financial system has collapsed since the onset of the pandemic, with a nosedive in tourism sales as well as foreign employee remittances.