Sri Lanka Doubles Interest Rate

Sri Lanka’s central bank raised borrowing costs by an unprecedented 700 basis points to tame inflation that has been the result of an economic crisis driving a crippling shortage of basic goods.

The Central Bank of Sri Lanka on Friday hiked its key interest rate from to 14.5 percent from 7.5 percent.

The central bank noted that the move was because it expects inflationary pressures to “further intensify in the period ahead, driven by the build-up of aggregate demand, domestic supply disruptions, exchange rate depreciation and the elevated prices of commodities globally.”

The move comes as Sri Lanka faces its worst economic crisis since gaining independence in 1948. Its foreign exchange reserves are rapidly depleting, leaving the country strapped with cash to import essential goods.

Inflation in the island had hit 18.7 percent in March.

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