Sri Lanka fiddles with imported food prices as inflation rages

November, 05 (LBO) – Sri Lanka’s finance ministry said Tuesday it was cutting duty on imported potatoes and onions in a bid to control rising food prices in December, as inflation in November rose to 19.8 percent. A kilogram of potatoes and onions were charged a cess of 20 rupees per kilo in a bid to protect local farmers.

“In order to prevent prices of foodstuff going excessively high in the coming festive season the step taken by the government will control the price of potatoes and big onions,” the Ministry of Finance said in a statement.

“Because is not a harvesting season, this move will not harm local producers.”

Sri Lanka has kept potato prices high to protect a powerful farmer lobby in the hill country.

The duty would be re-imposed at the end of January, the finance ministry said.

In November inflation rocketed up by 4.4 percent on the back of a 1.8 percent jump in October, which analysts say is due to excessive government borrowing from the central bank to bridge the budget deficit.

Central Bank credit to government rose to 103.6 billion in September when Sri Lanka’s balance of payments troubles gathered pace.

Sri Lanka has negative real interest rates, which has led