According to official data released, Sri Lanka’s inflation decreased to 12% in June, the lowest level since the island nation plunged into an unparalleled economic catastrophe the previous year.
In April 2022, Sri Lanka fell behind on its USD 46 billion international debt, causing food, fuel, and pharmaceutical shortages for its population for months.
Since the government received a USD 2.9 billion bailout from the International Monetary Fund in March, the situation has subsided.
The rate of inflation in June was the lowest since it was 9.9% in November 2021.
It has decreased from a peak of 69.8% in September and 25.% in May.
“Inflation is expected to reach single-digit levels by early third quarter 2023,” the Central Bank of Sri Lanka stated.
More than a quarter of Sri Lanka’s outstanding foreign debt is held by international sovereign bondholders, who will receive a 30% haircut under the government’s debt restructuring plan.
Last month, the International Monetary Fund noted “tentative signs of improvement” in Sri Lanka’s economy but cautioned Colombo that more difficult changes were still required.
Last year’s economic crisis sparked months of civil unrest which eventually toppled then-president Gotabaya Rajapaksa.
To increase state revenue, his successor Ranil Wickremesinghe hiked taxes, eliminated significant energy subsidies, and sharply increased prices.
Meanwhile, the World Bank approved USD 700 million in budget and social assistance for Sri Lanka, the largest tranche of funding for the troubled island nation.
About USD 500 million of the funds will be made available. The remaining USD 200 million will go to budget support, while the remaining USD 200 million will go to social assistance for those hardest hit by the crisis.
“Through a phased approach, the World Bank Group strategy focuses on early economic stabilization, structural reforms, and protection of the poor and vulnerable. If sustained, these reforms can put the country back on the path towards a green, resilient and inclusive development,” the World Bank’s country director for Sri Lanka, Faris Hadad-Zervos, said, India Today reported.