Sri Lanka in economic emergency as food prices soar

BBC: Sri Lanka has declared an economic emergency, after a steep fall in the value of the South Asian country’s currency caused a spike in food prices.

Authorities say they will take control of the supply of basic food items, including rice and sugar and set prices in an attempt to control rising inflation.

The Sri Lankan rupee has fallen by 7.5 percent against the US dollar this year.

The wide-ranging emergency measures came into effect on Tuesday.

A former army general has been appointed by the government as the commissioner of essential services, with the power to seize stocks held by traders and retailers.

“The authorised officers will be able to take steps to provide essential food items at concessionary rate to the public by purchasing stocks of essential food items,” the President of the island nation, Gotabaya Rajapaksa, said in a statement.

“These items will be provided at government guaranteed prices or based on the customs value on imported goods to prevent market irregularities,” the statement added.

The announcement came after a surge in the cost of basic foodstuffs such as sugar, onions and potatoes.
There have also been long queues outside shops due to shortages of other goods including milk powder, kerosene and cooking gas.

The country’s Census and Statistics Department said the increase in the foreign exchange rate was one of the reasons behind rising prices of many essential items over the last year.

Month-on-month inflation rose to 6 percent in August, mainly due to high food prices, the department said.

The country, which is a net importer of food and other commodities, is witnessing a surge in coronavirus cases and deaths which has hit tourism, one of the country’s main foreign currency earners.

Partly as a result of the slump in tourist numbers, Sri Lanka’s economy shrank by a record 3.6 percent last year.
In March last year, the government imposed an import ban on vehicles and other items as it tried to stem the outflow of foreign currencies.

Earlier this month, Sri Lanka became the first country in the region to raise interest rates in an attempt to shore up its currency and help ease the inflationary pressure of the high cost of imports.

Sri Lanka is currently under a 16-day curfew until Monday because of a jump in COVID-19 cases.