COLOMBO: Sri Lanka drastically cut import taxes on essential foods Wednesday to curb record high inflation before its annual budget presentation. Finance Minister Mangala Samaraweera said he was slashing taxes immediately on six commonly consumed commodities to cut high living costs.
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“Tomorrow I will unveil a budget that will boost the entrepreneurial spirit of our young people,” the minister told reporters.
“But we also need to address the immediate issue of food prices.” The government slashed tariffs on lentils, onions, potatoes, cooking oil, dried fish and sprats, staples of the Sri Lankan diet.
According to the Colombo Consumer Price Index, inflation hit 7.8 percent last month, the highest since the index was launched in 2013. The government has blamed the record inflation on sharp increases in food prices.
Tens of thousands of acres of rice and vegetables were wiped out by severe floods and a devastating drought earlier this year that killed hundreds in the island nation. The tax cuts will cost the state some $10 million a month, the minister said, an amount that will be compensated for in the national budget through fresh taxes or cuts in spending, he added.
The move comes at a time when Sri Lanka saw a 7.4 percent dip in worker remittances, its main source of foreign currency, underscoring challenges for the government’s coffers.
