Sri Lanka’s Inflation Accelerates to Asia’s Fastest on FX Crunch

(Bloomberg) -- Sri Lanka's inflation rate surged past Pakistan to make it the fastest in Asia, stoked by failed harvests, import restrictions to conserve dwindling foreign-exchange reserves, and high global prices of key commodities. 

Consumer prices rose 14.2% in January from a year earlier, faster than the median estimate of 13.2% in a Bloomberg survey. The average annual inflation rate rose to 6.9%.

Quickening prices pushed the central bank to raise its main interest rate for the first time in three meetings this month. The island nation's foreign reserves were about $3.1 billion in December, with almost $7 billion of overseas debt due for repayment in 2022. 

President Gotabaya Rajapaksa's administration announced a $1 billion relief package this month, raising salaries of government employees and offering farmers compensation for failed crops in a bid to temper public anger over surging prices of food and medicine. 

Sri Lanka's cabinet has also approved importing rice from India to cool prices. It is seeking a debt restructuring from China -- its biggest creditor -- after drawing down a $1.5 billion Chinese swap line and securing another $400 million facility from India. 

Pakistan reported a 12.3% inflation rate in December, which could rise to 13% this month, according to a Bloomberg survey.

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