Sri Lanka's Bankruptcy, Colombo Inflation Soars 18.8% (YoY)

The depreciation of the Sri Lankan Rupee (LKR) against the United States dollar (USD) has triggered a surge in food and other prices, including fuel.

According to data from the Department of Census and Statistics Sri Lanka, the country experienced 18.8% inflation in March 2022 compared to March of the previous year (year on year/YoY). This figure is higher than the previous month's 15.1% (YoY). Sri Lanka's inflation has shown an upward trend since October 2021, along with rising oil prices, as seen in the graph.

The food index has even risen by 30.1% over the past year and surged by 42.2% compared to December 2019.

As is known, Sri Lanka is on the brink of bankruptcy after suspending payments on matured debts. The LKR has depreciated by more than 63% against the USD year to date (YTD).

Based on data from the Asian Development Bank (ADB), Sri Lanka's revenue ratio fell by 0.8 percentage points to 8.6% due to the shrinking growth of tax and non-tax revenue.

Sri Lanka's fiscal deficit in 2021 is estimated to have narrowed to 11.1% compared to the previous year's 12.75% of GDP. This is due to the increasingly limited fiscal financing available, both from domestic and global financial markets.

The government debt ratio increased to 107% of GDP in 2021 (estimate) due to the impact of the Covid-19 pandemic. Before the pandemic in 2019, Sri Lanka's government debt ratio was 86.8% of GDP.