In August, Sri Lanka’s inflation rate increased to 70.2%

Sri Lanka’s annual inflation rate increased to more than 70% in August as it battles its worst economic crisis in more than seven decades.

Additionally, according to official data, food costs increased 84.6% from a year earlier.

The 22 million-person South Asian nation descended into political and economic anarchy this year due to a lack of foreign money.

The nation has struggled to pay for essential imports like petroleum, fertiliser, and medication.

The Central Bank of Sri Lanka predicted that inflation would decline last month as the nation’s GDP slowed after reaching a peak of around 70%.

According to official data released last week, the economy shrank by 8.4% in the three months leading up to the end of August.

Before the pandemic, Sri Lanka mainly relied on foreign exchange from tourism, including US dollars.

Although intended to stop the spread of COVID-19, border closures drove travellers away and had a significant negative impact on the nation’s economy.

This, along with years of financial mismanagement, contributed to Sri Lanka’s debt default earlier this year.

President Gotabaya Rajapaksa of Sri Lanka fled the country and resigned in July as a result of the country’s recent political unrest.

That occurred as hundreds of thousands of people demonstrated against a dramatic rise in food and fuel costs in frequently violent demonstrations.

The administration of Mr Rajapaksa was criticised by many Sri Lankans for how it handled the situation.

Sri Lanka and the IMF came to a tentative agreement earlier this month for a $2.9 billion (£2.6 billion) loan. The arrangement, nevertheless, is conditional on the nation’s receiving money from unofficial creditors as well.

On Tuesday, India announced that negotiations to restructure Sri Lanka’s debt had begun, and it also pledged to make long-term investments. Previously, India gave its smaller neighbour financial assistance of approximately $4 billion.

Additionally, India granted a $55 million credit line and postponed payment on approximately $1.2 billion in imports from Sri Lanka.

On Friday, Sri Lankan government representatives are scheduled to meet with creditors to examine the severity of the nation’s economic issues and a plan to restructure its obligations.