PUBLIC ANGER GROWS AS SL PLUNGES INTO SEVERE TURMOIL

• Govt. under pressure to urgently ease the escalating crises 
• Public ask for some relief from power and fuel crisis and cost of living 
• CEB warns power cuts may increase to eight hours daily by March end
• Consumer Rights Movement says prices of essential foods rising daily   
• Consumer Rights Movement says prices of essential foods rising daily   
• Economists say an agreement with IMF would play an important role   
• Finance Minister to rush to India today to discuss loan  
• President says to pay for fuel immediately for power generation   
• Senior CEB sources say power crisis result of all governments failing   
• Dollar sold at over Rs.260 in black market, official rate Rs.203  
• Massive drug shortage expected in three months

By JAMILA HUSAIN  

Public anger has grown in Sri Lanka as the government is  struggling to sort the foreign exchange crisis, thereby leading to the massive power and fuel crisis, a halt in imports as well as a soaring  cost of living with some terming the daily struggles as ‘unimaginable’.   In fact public confidence in this government has dipped with  the escalating turmoils and people are urging for some relief from the  President and Prime Minister to carry on with their daily lives.  

The opposition too have failed to play any vital role with  statements being limited only to social media and protests being limited  to Parliament. In fact, as much as the popularity of the government has  dipped, popularity of the main opposition - the SJB has also dipped with  public confidence on almost all parliamentarians now lifted. 

Presently Sri Lanka is seeing long queues for fuel, essential food items and even medicines with officials warning this will  only deepen further in the coming months if the dollars fail to come  in.   

For that, the government is stubborn it does not want to go  in for an agreement with the IMF, which many economists see as the most  ideal solution for immediate relief, and instead hope countries will  grant big loans which will help them out of the crisis with the dollars  coming in.  

Finance Minister Basil Rajapaksa is off to India yet again  today, his second visit to New Delhi in two months, to discuss a one  billion dollar loan agreement that will facilitate the imports of  essential commodities and pharmaceuticals. The agreement is to be signed  with an Indian Bank with the intervention of the Indian government.   

The Daily Mirror learns that discussions to obtain loans  are also ongoing with Saudi Arabia and China in order to increase Sri  Lanka’s foreign reserves, while presently Sri Lanka’s foreign reserves  stands at US2.3 billion dollars only as of end January.   

This however, is not enough. In fact, in order to save dollars,  Sri Lanka halted almost all its imports to prevent the dollars from  going out. This has led to the country plunging into chaos and the  lengthy queues for almost every essential needs.   

Food crisis in Sri Lanka what lies ahead?  

While food such as rice, milk powder, dhal and sugar are  now limited, the prices of these items are also soaring. Chairman of the  National Movement for the Protection of Consumer Rights, Ranjith  Vithanage told Daily Mirror that in several areas these items were now  not available and there was a limit that each individual could purchase.  He said that items such as rice, sugar, flour and milk powder were  being sold at different rates and there was no price controls as the  government had cancelled the necessary gazette which made it mandatory  for prices to be controlled on essential items. He said initially this  was not so. Prices of these items would only increase in a year or two  and that too because of some reason. But now prices were fluctuating  daily with no stable prices maintained. He said retailers sold it at  much above the market rates and if today the price of a kilo of sugar  was Rs.120 then tomorrow it could rise to Rs.240. “There is nobody  monitoring this and these items are being sold at exorbitant rates.  Even the locally manufactured items including basic vegetables are being  sold at skyrocketing prices,” Vithanage said. He further alleged that  despite people standing in queues for hours to purchase these essential  food items, they had received complaints that those who paid much higher  prices behind closed doors were handed over the items first and there  was no limits for them. This has severely angered the public but  authorities have gone blind to it. Vithanage also said that with the  country having no dollars, essential food items imported into the  country remained stuck at the Colombo Port and till such time Sri  Lanka’s foreign exchange crisis did not ease, the shortage in all food  items would continue and prices would continue to soar.   

In fact this shortage has prompted the Consumer Affairs Authority to act.   

A senior official of the Consumer Affairs Authority (CAA)  told Daily Mirror that they are going to identify the existing essential  goods stocks that are already with the importers as importers usually  keep a backup stock that was sufficient for two months. Once they  identify this, all these items will be immediately released into the  market.   
The officials said the government also intends to import  critical item stocks from India, and preparations are being made. The  CAA will next week meet the importers to get a count of their stocks.  

Finance Minister Basil Rajapaksa however said yesterday  that based on data available with the Sri Lanka Customs, essential goods  that are required for three months have entered the country.  

Medicine shortage - Panadol, Panadein, Paracetamol, Insulin, Saline and other essential drugs to stop in three months

The public have complained that essential drugs such as Panadol  and even insulin are very limited in the market and whatever socks are  available are being purchased by desperate customers. The All-Island  Private Pharmacy Owners’ Association (AIPPOA) said that this was because  the ingredients required to manufacture these medicines had been halted  due to the ban on imports. In fact the situation will worsen so much  that in three months most of these essential drugs will not be available  in the market with the government presently not having any backup  solution.   

“With the current dollar crisis in the country, the  manufacturers and importers cannot manufacture or import the required  medicine stocks as they are higher in price. If some of the drugs they  import are subjected to a price control imposed on several drugs, they  cannot sell them in the local market. Most of the drugs are sold at  controlled prices,” officials said.   

Power Crisis in Sri Lanka only to deepen - 10-hour power cuts to be imposed daily from March 

The Public Utilities Commission of Sri Lanka increased the  power cut timings to over five hours today. In a special cabinet meeting  held with President Gotabaya Rajapaksa on Tuesday, sources said the  President was desperate that monies be released to clear the fuel stocks  lying at the Colombo Port to ensure power cuts are limited as much as  possible. Sources within the CEB said the situation however was ‘at its  worst’ and will only escalate further. With the lack of dollars to  purchase fuel, these past few months, officials were compelled to switch  to hydropower and have now used up the water from its reservoirs. “Now  only the rains can save us and a miracle. If not we will be compelled  to go in for 10-hour power cuts from March due to the lack of fuel  supplies and lack of water,” a senior CEB source said.   

The Daily Mirror in its articles on the power crisis  published last month had in fact predicted this. In previous articles,  the Daily Mirror had said the power crisis would lead to long power cuts  imposed daily and by March, a power supplying time would be released,  similar to some African countries. The CEB is now preparing for the  worse and have urged the public to use electricity sparingly. The  Kelanitissa Power Plant has come to a complete halt due to the lack of  fuel while other plants are running on a bare minimum. CEB officials  said this however was not the fault of this government alone and even  the past government was to blame for failing to take the country towards  a self-sustained economy. “Only a miracle can now save us from the  power cuts,” CEB sources said.   

Economic crisis - Where do we stand at the moment   

According to Deshal de Mel, Research Director at, Verité  Research, Sri Lanka has had challenging macroeconomic and debt dynamics  even prior to the COVID-19 pandemic. However, the country maintained  access to global financial markets until early 2020 and was able to  manage its external debt as a result. However, with the tax policy  changes at end 2019 Sri Lanka lost access to global financial markets  (Fitch revised Sri Lanka’s credit rating to negative on 18th December  2019 citing reversals in tax policy). Subsequently, Sri Lanka has had to  settle maturing debt out of its foreign exchange reserves, resulting in  reserves declining rapidly in the last two years from US$7.6bn at end  2019, de Mel said.  

He further explained that Sri Lanka’s foreign exchange  reserves had declined to US$ 2.3 bn by end January 2022, of which  US$1.57 bn was a yuan-denominated swap. “There is no clarity as to  whether the yuan swap can be used to settle US dollar-denominated  liabilities, therefore excluding the yuan swap, usable foreign reserves  were at US$ 790 mn as at end January - this is just around half a month  of import coverage. Sri Lanka’s monthly average imports in 2021 was US$  1.7 bn - that was when oil was a lot cheaper than it is today,” de Mel  said.   
Sri Lanka has to settle US$ 1.84 billion foreign currency  debt liabilities in the months of February and March 2022. This is  excluding current account payments (that is payments for imports of  goods and services). In addition to US$ 6.9 bn liabilities to be settled  during 2022, Sri Lanka would also have to finance a current account  deficit of around US$ 2.5 to 3 bn for the year.  

“Given the country’s low reserve position and large near  term debt liabilities, Sri Lanka has had to ration the usage of foreign  exchange to pay for imports of goods and services, resulting in limited  availability of foreign currency to pay for critical imports including  fuel. Sri Lanka’s authorities expect to bridge the gap between maturing  debt liabilities and limited reserves through bilateral loans and swaps,  asset divestments, and tourism inflows. However the gap between near  term debt liabilities and reserves is large and time is limited,” de Mel  said.  
De Mel further said that to emerge from this crisis Sri  Lanka’s most pragmatic option would be to enter into negotiations with  its foreign creditors with a view to restructuring its external debt.  That could entail delaying capital payments to create some space for Sri  Lanka to put in place the necessary fiscal reforms and build up  reserves to improve its credit ratings and regain access to global  capital markets in order to continue servicing its external liabilities.    

“An agreement with the IMF would play an important role in  providing a credible debt sustainability analysis that will be accepted  by all stakeholders, and an IMF programme can unlock additional sources  of financing for Sri Lanka whilst it navigates what could be a  challenging restructuring process,” de Mel said.  

Dollars sold at Rs.260 in the black market as official rate stands at Rs.203  

Amidst all these crises, those who are travelling overseas  are in for another shock. With banks giving limited dollars, that too  after following some procedures, people were presently dependent only on  the black market to purchase their dollars. Presently one US dollar is  available at Rs.260 in the black market when compared to the official  rate of Rs.203 sold by the banks.