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Current Affairs

Food crisis in Sri Lanka

Date: 08 September 2021 Tags: Miscellaneous

Issue

Prices of food and staples are increasing at an alarming rate in Sri Lanka as the country grapples an economic crisis.

 

Background

The imports of the country have been badly hit. This has forced the government to declare an emergency.

 

Details

  • Several experts have pointed to the underlying structural issues that have caused the crisis, when the blame was squarely shifted on the Covid-19 pandemic.

  • The President has invoked rules that prevent hoarding of staple food items. Officials are given power to seize stocks and decide prices at which they are to be sold. 

  • The President was forced to issue the public security ordinance. This will stabilize the price and supply of important commodities such as rice and sugar.

  • The government has appointed several officers who will have power to provide essential food items at concessionary rate to the public by purchasing stocks of essential food items.

  • The official spokesperson has said that there is no food crisis in the country and the orders were issued to prevent hoarders from escalating the issue.

 

Cause of the crisis

  • Sri Lanka earns majority of its foreign exchange from tourism and exports of tea. The pandemic caused demand to fall and its economy shrank by a record 3.6 per cent in 2020.

  • As the foreign reserves deplete, the country will have no money to pay for its imports such as sugar, rice, oil etc.

  • Before the regime of Gotabaya Rajapaksa, the foreign reserves of the country were $7.5 billion but now it has shrank to $2.8 billion.

  • In addition, the country is approaching new commitments for returning loan amount to international lenders. The government does not have breathing space.

  • The Sri Lankan rupee lost more than 20 per cent of its value against the US dollar causing imports dearer and inflation rate increase.

 

Impact on foreign earning

The Easter Sunday bombings of 2018 gave a major setback to Sri Lanka’s tourism industry. The role of tourism in Sri Lanka’s GDP was 4.9 per cent in 2020, down from 10.4 per cent.

 

Addressing the problem

  • The government has banned and restricted several items from import. This includes Strawberries, vinegar, toothbrush handles and wet wipes.

  • The government has also asked people to reduce usage of fuel in order to cut import. It may issue rationing to restrict usage in future.

 

Implications

 The government is forced to initiate currency swap deals with India, China and even Bangladesh to tide over the crisis.

 

Impact on agriculture

  • The government is implementing complete organic farming in the country. It will save about $400 million by avoiding chemical fertilizers.

  • Domestic producers of tea, cinnamon and rice are worried that this move may hamper yield and further create food disaster in the country.