A food shortage brewing for several weeks, coupled with an economy marred by depleted foreign exchange reserves, has pushed Sri Lanka to the brink of a crippling crisis. The federal government was forced to announce a state of emergency last month.
The island nation’s president, Gotabaya Rajapaksa, on 30 August said his administration had to declare an economic emergency to control surging food prices and reduce hoarding by speculators as people were queuing up outside food stores to purchase essential supplies. State military forces were also deployed on the ground to check for the alleged hoarding of food supplies.
Nearly two weeks later, local media reports show an astronomical shortage in basic food supplies such as rice, sugar, milk powder, pulses and cereals. Senior citizens and families with young children have been hurt the most.
Some supplies such as sugar and pulses are being sold at double or three times the price as traders have started to feel the pinch from margins narrowing in wholesale and retail markets, according to local reports.
Why is there a food shortage?
The crisis was magnified in the last few weeks due to factors such as restrictions on importing goods, alleged hoarding, depleted foreign exchange reserves, the Covid-19 pandemic’s shadow on the tourism industry and the federal administration’s sudden push for organic farming.
Starting this month, the monetary board of Sri Lanka’s Central Bank imposed import restrictions on more than 600 consumer goods. These included cereals, starches, cheese, butter, chocolates, mobile phones, fans, TVs, apples, oranges, grapes, beer and wines, according to a local report.
This emergency measure, aimed at reducing expenditure, has not worked out well for an economically struggling nation, which largely imports its essential goods from the international community. Factors such as production shortages and logistical bottlenecks caused by a fresh wave of Covid-19 infections have also added to the nation’s problems.
Sri Lanka needs about $100 million for essential food imports every month for items such as lentils, sugar, onions, potatoes, spices and cooking oil, experts told Reuters.
Why is Forex also to be blamed for the food shortage?
A crucial factor at play is Sri Lanka’s foreign exchange reserves — presently in the red zone. A good chunk of the country’s finances is being used for debt settlement.
At the end of July, Sri Lanka’s foreign reserves were logged at US $2.8 billion, registering a significant dip from US $7.5 billion in November 2019, reported the BBC.
Sri Lanka’s debts have mounted to about $4 billion, with interest as well.
“We know that our expenditure has always been higher than our revenues. But this year, the loss of revenue so far has risen to nearly Rs. 1.6 trillion more than estimated,” finance minister Basil Rajapaksa told the Parliament last week. “Our income comes from three main sources: the Customs, Excise and Inland Revenue. They have all shown minimal returns.”
Hours before the emergency was announced, the finance minister had said the government was trying to limit loans. He added that “imports will be limited to essential needs and only for projects that have a return”, according to a local report.
How bad is Sri Lanka’s food shortage?
Locals have been teaming up outside grocery shops in large numbers to buy their daily food essentials and are coming back home with limited food in their bags as prices have risen sharply.
Sugar, which has been authorised by the government to be sold at Rs 120 (£ 0.43) for a kilogram, is being sold at Rs 192 (£ 0.70) or even Rs 230 (£ 0.83) in some places, reported Colombo’s Sunday Times.
Officials have said that only 25 kg of rice will be made available for purchase until stocks of rice seized by government agents are released to the market, creating a vacuum in the supply of the staple ingredient in homes across the South Asian country.
A pulse (masoor dal) which was sold at Rs 167 (£ 0.61) for a kilogram till last year is now being sold for almost double the price at Rs 310 (£ 1.12).
Sri Lankans have also been rushing to stores for milk powder. Supermarkets are reportedly allowing the purchase of only a single unit of 400 gram of the dairy product. “There are elders who stock a few powdered milk packets to avoid going out. Some families with underweight or weak infants replace milk powder with formula due to costs,” a local resident told Colombo’s Sunday Times.
With a decrease in supplies, shops are seeing their complete stock getting purchased within hours.
How has the government responded?
The government has refused to accept there are food shortages.
“It is reiterated that there is no food crisis, and accordingly there is no crisis to come out from,” the administration said on Saturday. “The country has sufficient stocks of all food items and there is no shortage whatsoever.”
“However, some unscrupulous traders have mischievously hoarded stocks of several food items in order to create an artificial shortage and profit by such exercise,” it said, adding that the government was taking steps to deal with the situation.
The government also portrayed a positive economic image and said: “...this year, Sri Lanka will record an economic growth of over 4.5 per cent. Inflation is in mid-single digits. Every single debt instalment has been paid on time. Of the Covid-19 vulnerable population, 99 per cent have been vaccinated with the first dose while 65 per cent have received the second. Exports and remittances are rising. The banking system is vibrant and stable.”
It added that the government did not foresee any food shortages in future.
The administration said it was ready to provide a "categorical and firm assurance that all essential items would be readily available at all times".
“Food security and law and order are two of the top most priorities of the government, and hence the government considers the availability of all essentials as a vital part of its functions,” the statement added.
How has Covid-19 impacted the situation?
High global market prices driven by the pandemic, have had a knock-on effect on prices in Sri Lanka.
The country is also witnessing a sharp rise in Covid-19 cases, resulting in curfews and lockdown-like measures, affecting its financially lucrative tourism sector.
As a result of a slump in tourism-driven income, Sri Lanka’s GDP shrank by a record 3.6 per cent last year.
Who is helping internationally?
Witnessing the unfolding crisis, several local help groups and members from the international community have decided to distribute food packages on the ground and bring food security among Sri Lankans.
The Islamic Dawoodi Bohra community’s philanthropic arm also initiated supply of food to Sri Lanka and shared photos on Twitter.