Sri Lankans are feeling the pinch from the rising cost of living

By Anbarasan Ethirajan
BBC News Colombo

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Caption:

Ms. Dilrukshi is now able to cook outside, so that there’s no smoke inside the house

Niluka Dilrukshi says that the cost of cooking gas has almost tripled, and she cannot afford to buy it. Mother-of-4 Niluka Dilrukshi, 31, says she is now limited to cooking with firewood.

I used to give fish and vegetables to my kids every day. She says that now they only give them rice and one vegetable. “Previously, we could afford three meals per day. Now we only have two meals per day.”

Mrs Dilrukshi lives with her family in Colombo, Sri Lanka. Her husband, a day worker, is suddenly struggling to pay the bills due to rising costs of basic items.

The price for a standard cooking-gas cylinder rose from $7.50 up to $13.25 over the last four months, an increase of approximately 85%.

Sri Lanka is an island country of 22 million that faces an unprecedented economic crisis. At the end of November its foreign currency reserves were at $1.6 billion, barely sufficient to purchase a few weeks’ worth of imports.

The government had to stop imports of many essential commodities, including food, in an effort to protect its dollars reserves. This, along with rising fuel costs and freight costs has caused the rice and milk powder to be more expensive.

The sharp increase in living expenses isn’t just an issue for Sri Lanka. Many countries of Asia such as Pakistan, India and neighbouring Pakistan face rising inflation. This means that people all over the continent have to increase their incomes in order to pay for food and fuel costs.

Sri Lanka’s situation is especially acute because of its smaller size and dependence on foreign imports for food. Sri Lanka’s small dairy industry can not meet the local demand, so it has to import powdered milk.

Take a look at the market

There are many shops selling greens such as carrot, beetroot and curry leaves at Colombo’s bustling main vegetable marketplace. Shoppers openly lament the rising prices, and bargain hard for a lower price or only buy a small amount.

Because the price of food has risen, our ability to survive on our current monthly salaries is limited. There is no hope for the future. Also, rice prices have risen. One of the shoppers says that there is a queue at government shops.

Sri Lanka’s essential foodstuffs are in great demand and the food prices have risen by an unprecedented 21.1% over the past year.

Following a sharp hike in milk powder prices – up 12.5% – the cafĂ© owners’ association has decided to suspend selling popular staple, milk tea, entirely. According to them, milk tea will be available only on request and at a more expensive price.

Sri Lankans have a high tolerance for food inflation. There has been already a lot of negative sentiment regarding the constraints that we are seeing,” says Deshal de Mel, an economist with think tank VeritĂ© Research. I think that it’s probably near the point where there is no tolerance for this price escalation. [continues].”

The government was able to raise its reserves to $3.1 billion just before the new year, reportedly by currency swap agreements.

Sri Lanka’s external debts amount to more than $45 billion. It needs to raise more money this year to pay off its debt service. The Maldives and Pakistan are both in similar situations.

Sri Lanka has been suffering from the pandemic as well as rising fuel costs. With international flights grounded, the country’s main revenue generator, tourism, is suffering a major blow.

In 2019, Sri Lanka’s tourism revenue was nearly $4bn. This has fallen by 90% because of the pandemic.

According to the government, its options are very limited.

We had to restrict imports to alleviate the increasing pressure on our current accounts and trade deficits due to the pandemic. It is a responsibility government that must handle it,” Shehan Semasinghe from Sri Lanka, tells BBC.

Meanwhile, the opposition party has protested rising living expenses. The protests have been ongoing for some time. Our lives have exceeded our resources. Harsha De Silva is an opposition MP who was a minister for economic reforms and says that we’ve been sucking in more than what we are producing.”

In an effort to soothe public anger at rising cost, the government has announced a $1bn relief package that includes a pension and pay increase for employees. The government also announced income support to its most vulnerable citizens and lifted some tax on certain food items.

These figures are made against the background of increasing global oil prices. In 2020, shipping standard containers from Europe and Asia cost around $2,000, but it was over $10,000 in 2018.

Unctad is a UN agency that warned recently about high freight rates threatening global economic recovery. According to Unctad, small islands like Sri Lanka that rely on shipping by sea will be most adversely affected by an increase in import prices.

Increased fuel and energy prices has had a ripple effect on wholesale price, with transporters charging more. India’s neighboring country saw its annual price-based inflation hit an all-time high last November at 14.2%.

In Pakistan, however, consumers’ price inflation rose to 12.3% last December. This is the highest level in almost two years. The rise in food and other necessities can be attributed to rising fuel prices.

According to recent data from the Food and Agricultural Organisation, (FAO), global food prices in 2021 were 28% more than they were last year.

Abdolreza Abbassian, senior FAO economist, says that “the high price of inputs and ongoing pandemic in the world make it difficult to believe there will be a recovery to stable markets even by 2022.”

Back in Colombo people such as Mrs Dilrukshi are worrying that, if the local price rises even a bit more, they will have trouble keeping the firewood lit in their kitchens.

Source: BBC.com

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