Explained: The Perfect Storm That Led To Sri Lanka’s “Food Emergency”

The Parliament of Sri Lanka on Monday September 6 approved a national emergency declared by President Gotabaya Rajapaksa on August 30.

The government said the emergency was needed to control soaring food prices and the hoarding of basic necessities by a “food mafia”. But the opposition said it was “in bad faith, with the ulterior motive of further restricting the basic rights of citizens and moving further in the direction of authoritarianism.”

The urgency added to the uncertainty of The food crisis in Sri Lanka, which has all the makings of a perfect storm.

Debt, currency crisis, inflation

Sri Lanka is curved by a huge external debt burden. She is unable to repay these loans due to extremely low foreign exchange reserves.

With the tourism industry destroyed since the Easter attacks of 2019, Sri Lanka had lost one of its main currency extractors even before the pandemic struck.

The tea and clothing industries have also been hit by the pandemic, affecting exports.

Remittances increased in 2020, but are not enough to pull Sri Lanka out of its crisis. At the end of July, the country’s foreign exchange reserves stood at $ 2.7 billion, while it needs to repay foreign debts of around $ 4 billion.

A planned $ 400 million currency swap with India has yet to materialize. In March, Sri Lanka secured a $ 1.5 billion currency swap deal with China. Bangladesh last month gave a first installment of $ 50 million in a $ 250 million loan swap agreement.

A currency swap is a loan contract to be repaid with interest in the local currency.

Low foreign exchange reserves also mean that Sri Lanka has not been able to import as much as before.

A Sri Lankan food vendor cooks rice in a makeshift hut in Colombo, Sri Lanka. (AP Photo / Eranga Jayawardena, file)

Earlier this year, it halted imports of vehicles and several other items, including edible oils, turmeric, and even toothbrushes, in an effort to save valuable foreign exchange. Sri Lanka imports many of its essential food products, including pulses, sugar, wheat flour, vegetables and cooking oil.

This is the supply problem of the crisis.

On the demand side, the printing of Rs 800 billion by the Central Bank of Sri Lanka over the past 18 months to ease the economic crisis has increased the liquidity of the economy. But this injection of money, and the consequent increase in demand without a corresponding increase in supply, has led to a sharp increase in inflation.

This in turn devalued the currency, made imports more expensive, added to debt and put more pressure on foreign exchange reserves.

The government’s decision, as part of the emergency, to price all essential items has hit imports even more, as traders are reluctant to buy at high prices internationally with no promise of return on sales. in national markets.

In addition, there is a restrictive import licensing regime.

Another emergency, old fears

The state of emergency was declared within the legal framework of the Public Security Ordinance (OSP).

Article 2 of the PSO empowers the President to declare a state of emergency in two situations: when the President is of the opinion that it is appropriate to do so a) in the interests of public safety and preservation of public order, or b) for the maintenance of supplies and services essential to the life of the community.

“With the declaration of a state of emergency on August 30, 2021, the president is now in a position to promulgate emergency regulations dealing with any subject at any given time. Given Sri Lanka’s history of emergencies, other security-related laws and the legacy of repression, this raises serious concerns, ”noted the think-tank Center for Policy Alternatives based. in Colombo in a statement.

While the emergency must be submitted to Parliament for renewal every three months, the President is empowered to pass regulations that do not require parliamentary scrutiny or approval.

“The importance of ensuring that the extraordinary powers conferred on the executive by these emergency regulations are used only for the specific purposes recognized by the regulations… must be recognized as a temporary grant of extraordinary powers to the government in times of crisis. acute. It should not be seen as a substitute for the “normal legal regime”. As such, the state of emergency should only be in effect for a limited period of time, ”the Center for Policy Alternatives note said.

He called on citizens to democratically challenge “any measure aimed at stifling dissent, restricting civil liberties and threatening Sri Lanka’s constitutional democracy”.

Sri Lanka was under an emergency for more than three decades during the war against the Liberation Tigers of Tamil Eelam (LTTE) until it was allowed to expire in 2011; then for brief periods during the anti-Muslim riots in 2018, and after the Easter attacks in 2019.

In parliament, opposition members argued there was no need for urgency, as other laws were available to control hoarding and cap food prices.

The appointment of a major general to the post of commissioner general of essential services has raised fears that the civil administration is bypassed.

Sri Lanka, Sri Lanka emergency, Sri Lanka food emergency, Sri Lanka debt, Sri Lanka news, Indian Express Fresh food is seen on a shelf in a supermarket in Colombo, Sri Lanka, June 17, 2020 (Reuters Photo: Dinuka Liyanawatte)

Memories of another food crisis

The last time the country experienced a food crisis was in the 1970s, during the Sirimavo Bandaranaike government’s experiment with socialism.

The long lines outside Sathosa public grocery stores brought up memories of the “mouth-watering economy” of those days, the Sunday Times of Colombo said in an editorial, recalling “the precious ration card that provided to each family a limited number of subsidized amounts of rice, sugar, kerosene, flour and dhal; the endless queues for bread and cloth; and the draconian exchange controls and exit permits. The elderly may remember -being that they had to wait impatiently for the arrival of the next ship with their food ”.

A ban on chemical fertilizers in March, when President Rajapkasa announced that the country would now grow only organic food, becoming the first country to do so, could exacerbate the shortage, agricultural experts said.

The move was aimed at saving foreign exchange in imports of these fertilizers, but there is concern that the sudden change in mid-harvest, without adequately preparing the soil, could negatively affect the yields of vegetables and rice.

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