SRI Lanka’s inflation more than doubled to 3.4% in November, the statistics office said today, a day after Colombo announced a deal to restructure nearly US$6 billion (RM28 billion) in bilateral debt.

The benchmark Colombo Consumer Price Index rose to 3.4% from 1.5% in October, official statistics showed.

However, the latest inflation number was still dramatically lower than the 61% recorded a year ago when the country was in the grip of an unprecedented economic crisis after running out of foreign reserves.

The sharp price rises in November compared to the previous month were due to the increases in electricity and water tariffs and fuel prices, the statistics office said.

Yesterday, the finance ministry said it had reached an “agreement in principle” with its lenders, including China, to restructure nearly US$6 billion in loans and unlock International Monetary Fund (IMF) funding for a bailout.

The country defaulted on its US$46 billion debt in April last year after running out of foreign exchange to finance imports of even the most essential commodities, making life a misery for the island’s 22 million people.

The ministry said the deal included a mix of extending the tenure and reducing interest on around US$5.9 billion in bilateral loans granted to the cash-strapped South Asian island.

Sri Lanka in March secured a four-year US$2.9 billion bailout package from the IMF subject to Colombo ensuring debt sustainability in line with agreed targets.

However, the release of a second US$330 million loan instalment had been held up since September due to delays in securing a deal with foreign creditors.

Sri Lanka’s largest single bilateral lender China had been reluctant to take a haircut on its loans and instead had offered to extend the term of its loans and adjust down interest rates.

The IMF warned in September that Sri Lanka’s “full economic recovery is not yet assured”.

At the peak of last year’s economic crisis, months of civil unrest forced the ouster of then-president Gotabaya Rajapaksa when protesters stormed his residence. – AFP, November 30, 2023.