Cash-Strapped Sri Lanka Records Highest Deflation in 61 Years
Colombo, November 30, 2024:
Sri Lanka recorded a historic deflation of 2.1% in November, marking the highest rate of deflation the country has seen since 1961. The economically fragile nation, still reeling from the aftershocks of its 2022 financial crisis, is slowly making strides toward recovery.
A Look Back: The Financial Crash of 2022
In 2022, Sri Lanka faced an unprecedented economic collapse, with inflation skyrocketing to nearly 70%. Shortages of essential consumer goods caused widespread hardship, drawing global attention to the island’s economic fragility.
IMF Bailout and Economic Reforms
The recovery process began with a $2.9 billion IMF bailout, which included austerity measures such as tax hikes and cuts to state spending. These reforms, coupled with adjustments in energy prices and food costs, have helped steer the economy toward stabilization.
Sri Lanka's central bank commented on the current deflationary trend, stating that it is largely driven by falling energy and food prices. The bank expects inflation to stabilize at its target level of 5% in the coming months.
Recent Trends in Deflation
- November 2024: -2.1%
- October 2024: -0.8%
- September 2024: -0.5%
This steady decline reflects the impact of stringent fiscal policies and adjustments in volatile price categories.
President's Commitment to Economic Recovery
President Anura Kumara Dissanayake, elected in September 2024, has committed to continuing the IMF bailout programme initiated by his predecessor. This includes maintaining higher taxes and reducing government expenditure to ensure long-term economic stability.
As Sri Lanka navigates its path toward recovery, the record deflation underscores both the challenges and progress of its economic reforms.
Reference from:-https://www.ndtv.com/world-news/cash-strapped-sri-lanka-records-highest-deflation-in-61-years-7138722