<div><span style="font-size: 1rem;">Sri Lanka's economic meltdown will result in a record contraction of at least eight percent this year but the public could soon expect some relief from runaway inflation, the head of the country's central bank said Thursday.</span><br></div><div><br></div><div>The island nation defaulted on its $51 billion foreign debt in April and is seeking an International Monetary Fund bailout after months of food, fuel and medicine shortages.</div><div><br></div><div>Its 22 million people have also suffered through lengthy blackouts and spiralling cost-of-living pressures after scarcity and a currency crash drove up prices.</div><div><br></div><div>The Central Bank of Sri Lanka had already projected the economy could shrink a painful 7.5 percent for the calendar year, dwarfing the previous record 3.6 percent contraction in 2020 as the pandemic raged.</div><div><br></div><div>"But now we think it will exceed 8.0 percent," governor Nandalal Weerasinghe told reporters in Colombo.</div><div><br></div><div>He said inflation -- officially running at 60.8 percent -- will peak at "about 65 percent" in September, followed by a gradual easing caused by lower demand and improvements in supplies.</div><div><br></div><div>The foreign exchange shortage that sparked the economic crisis had eased thanks to better currency inflows and lower imports, he added.</div><div><br></div><div>"We are now able to finance the most essential imports such as petrol and diesel and medicines," Weerasinghe said.</div><div><br></div><div>At the peak of Sri Lanka's fuel shortages, motorists had to wait for days and sometimes weeks to top up, but strict fuel rationing has shortened queues.</div><div><br></div><div>Months of protests over the collapsing economy culminated in the resignation of president Gotabaya Rajapaksa, who was forced to flee his official residence after it was stormed by a huge crowd last month.</div><div><br></div><div>Rajapaksa is accused of mismanaging the island nation's economy to the point where it was unable to finance even the most essential imports.</div><div><br></div><div>He has since travelled to Thailand and close associates have said he was desperate to return home, where he faces corruption charges that had been suspended because of his presidential immunity.</div><div><br></div><div>The political upheavals last month stalled talks with the IMF, but a delegation from the international lender of last resort is expected in Colombo before the end of August.</div><div><br></div><div>Weerasinghe said he was hopeful authorities would finalise a staff-level agreement with the Fund later this month ahead of a formal bailout deal. - AFP</div><div><br></div><div>bnbd24/fas</div><div><br></div>