By: Staff Writer
Colombo (LNW): Sri Lankans are in for a long drawn-out path out of the economic misery that they have dug themselves into, as the prevailing cost of living crisis could grind on for years with inflation staying higher than the pre-crisis level, this year if things turn out according to the forecasters’ expectations.
According to the medium-term inflation projections presented last week by the Central Bank together with the Finance Ministry to the country’s foreign creditors in September 2022 Sri Lanka’s runaway inflation is going to stay at 29.5 percent on average through 2023, before cooling to 6.0 percent in the following year.
Contradicting Central Bank’s predictions conveyed to Sri Lanka’s external creditors to get their assurance for debt restructuring in September 2022, Central Bank Governor Nandalal Weerasinghe now says that the inflation is likely to come down below 10% by the end of 2023, which would also help to gradually bring down the interest rates.
Sri Lanka’s key inflation rate eased to 54.2% in January from 57.2% in December, the country’s statistics department said.
Outlining the rationale for not bringing down the interest rates immediately, he explained to the COPF meeting recently that it was difficult to reduce rates immediately as the impact of previous measures in 2021 was reflecting adversely on the economy last year.
Asked how much money was printed in 2022, the Governor said it was a technical question and the total base money printed in 2021 was Rs. 344 billion, whilst the net basis reserve money issued in 2022 was below Rs. 40 billion.
However, political instability, social unrest and the time taken to activate the International Monetary Fund bailout package could determine how long Sri Lanka’s people will have to put up with these spiralling prices and remain miserable.
Sri Lanka’s officiate high level, as the larger majority, who cannot put up with the pace of prices, are either staying hungry or forgoing meals while the others board planes seeking better living conditions elsewhere, where at least their hard-earned money is shielded from the runaway prices.
Two-thirds or more people in Sri Lanka are forgoing meals while 32 Sri Lankans go abroad every passing hour, according to reports.
Meanwhile, the projections presented to the creditors also showed that the economy would continue to shrink in 2023, at 3.0 percent levels, before recovering to an insignificant 1.5 percent level in 2024. This level of growth is insufficient to create economic opportunities for the country’s workforce.
The runaway prices in a continuously declining economy could be the most toxic combination that its citizens could wish for and the Sri Lankans today are living that nightmare and it could last for several more years.