Credit agencies have recently warned Sri Lanka may need support to cushion the blow from inflation and foreign exchange headwinds.
Inflationary pressureshey said could be amplified by foreign exchange issues.
"We think this foreign exchange scarcity will continue to fuel inflationary expectations, which can be only temporarily mitigated by Sri Lanka's access to credit facilities from India, if a $1.5bn deal can be finalized. Moreover, elevated energy prices and risks from further administered adjustments to curtail losses in the electricity sector still loom," Citi analysts said it a recent note.
While, the government is likely to avoid IMF assistance for now,"we believe pressures will remain high gong into the July bond maturity," they added. Sri Lanka's benchmark inflation rate accelerated to 14% in December, up from 11.1% in November, according toThe central bank said food inflation hit 21.5%, noting price spikes for vegetables, rice and green chilies. Non-food inflation rose to 7.6% in December, which the central bank attributed to price hikes at restaurants, hotels as well as for alcoholic beverages and tobacco."We don't have any fuel shortage... There isn't any shortage of medicines.
"So just one or two items have been highlighted, but that doesn't mean that Sri Lanka has any shortage. We have all the foodstuffs available. And I don't think there's any reason to say anything much of that," added Cabraal.
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