According to the governor of the central bank in Sri Lanka, inflation will peak in the next two months and begin to moderate in September.
The national consumer price index increased by 45.3% in May, compared to 33.8% in April. The data showed that food inflation increased by 42% in May compared to the same month in the previous year.
The governor of the Central Bank of Sri Lanka told CNBC on Thursday that the country is eligible for an "extended fund facility" from the International Monetary Fund over the next three years.
The EFF was set up to help countries with their payments.
The economic crisis is the worst since the country gained independence.
The country is facing a fuel shortage and social unrest after it failed to pay its debts. The way for Ranil Wickremesinghe to be elected as president was paved by President Gotabaya Rajapaksa fleeing the country.
Protestors who stormed Sri Lanka’s Presidential Palace in Colombo earlier this month, will have to deal with inflation hitting highs of 70% before trending down later in the year, according to the country’s central bank governor.According to the central bank governor, the World Bank and the Asian Development Bank will add an additional $4 billion to the fund once the International Monetary Fund disburses money.
The current economic crisis is an opportunity for Sri Lankan authorities to learn from their past mistakes and not reverse reforms once the International Monetary Fund program ends.
He said that after the program ended, authorities moved back and reversed good policies.
It's an opportunity for the authorities to learn a lesson and move in the right direction. The key to managing the economy on a sustainable basis is that.
While it is important to have a social safety net for the poor and disaffected, the root cause of the current economic crisis is decades of fiscal mismanagement.
He said that the government has had large fiscal deficits for a long time. A high level of public debt has become unsustainable.
The new president, Ranil Wickremesinghe, is believed to be optimistic about carrying out reforms. He said that the new president had been involved in the negotiations with the International Monetary Fund.
He hopes that the commitment will continue so that we can reduce the time of pain that we are currently experiencing.
The problem of low foreign exchange reserves will continue until an agreement is reached with the International Monetary Fund, according to the central bank. Several friendly countries such as India, Japan, China and Bangladesh are negotiating lines of credit with Sri Sri.
He did not believe that Sri Lanka had fallen into a debt trap.
Over the past decade, China has extended loans to Sri Lanka on terms that are often described as opaque. Sri Lanka was forced to lease out its Hambantota port to a Chinese company for 99 years after failing to repay their debts.
The banker said he didn't agree with the idea of being trapped by China. We have a lot of debt with China.
Those projects have huge potential, he said.
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