COVID-19, food shortage and inflation could bankrupt Sri Lanka

    HealthCOVID-19COVID-19, food shortage and inflation could bankrupt Sri Lanka
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    COVID-19, food shortage and inflation could bankrupt Sri Lanka

    Food shortage and inflation are causing distress and the government has barely any foreign exchange reserves to import food – especially as agricultural productivity has fallen.

    Sri Lankan writer Basil Fernando today shared two poignant tales. The first from Anuradhapura is about a man asking the owner of a small shop for two raw papayas from the shop owner’s garden to feed his starving children.

    In another instance, a family used up their last savings to purchase 200 grams of flour. The family’s breadwinner is bedridden they have no money to buy medicines.

    The Sri Lankan media is not telling any of these stories.

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    On Monday, thousands, led by the country’s main opposition political party, the United People’s Force demonstrated in Colombo, blaming President Gotabaya Rajapaksa’s government for the economic crisis.

    “Reports of how people, particularly those from the lowest income groups, are coping with the present situation are not brought to the surface,” Fernando says.

    Sri Lanka is staring at bankruptcy and a widespread food crisis is engulfing the country together with a steady rise in inflation. Consumer prices reached 12.1 per cent year-on-year in December of 2021. This has been the highest inflation rate the country has witnessed since 2008 due to a record 22.1 per cent rise in price of food products in the space of one month.

    Food price inflation in December touched 22.1 per cent, up from 17.5 per cent in November.

    Foreign exchange reserves too have been dwindling. With just $1.5 billion in foreign reserves, the country will only be able to pay for a month’s imports. Sri Lanka is negotiating with China, its largest international lender for help. Simultaneously, a US$ 787 million of special drawing rights (SDR) from the IMF and a currency swap arrangement to the tune of US$ 150 million from Bangladesh’s Central Bank has not helped ease the price of food essentials, either.

    Sri Lanka finance minister Basil Rajapaksa has also held discussion with S Jaishankar, India’s foreign minister over a virtual meeting on Saturday.

    Crisis precipitated by COVID-19

    According to the US-based Trading Economics, “The cash-strapped economy is struggling to finance urgent imports to tackle an acute shortage of essentials in the country leading to rationing of food by supermarkets for quite a few months now.”

    End-August 2021, Sri Lanka had declared a food emergency as banks reported that their foreign funds had depleted.

    The crisis is the result of a cocktail of mishaps, primarily COVID-19 that hit its tourism economy. The economy diminished, shrinking by 3.6 per cent in 2020. This was the worst in 73 years.

    As agricultural input prices went through the roof, the government mandated an overnight shift to organic agriculture without consulting farmer groups. This has led to a bad harvest, resulting in run-away inflation. The country’s agricultural sector too has been experiencing the effects of changing climate and natural disasters.

    Besides, the garment manufactures too have been hit hard by COVID-19 and there are hardly any export orders.

    In 2020, IMF predicted a negative growth of 0.5 per cent for Sri Lanka and the government faced the challenges of reducing the fiscal deficit even as there were domestic and foreign debts to be serviced.

    In the meanwhile, 30-something Fathima Aroos tells her two young children that this is the month of Ramadan and that they are supposed to fast.

    She can’t feed the children three meals a day due to galloping food price.

    “This way, we can manage with a plain porridge after we break our fast and rice soaked in water and onion for suhoor (the early morning meal),” she says. “It keeps the children quiet.”

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