4 July 2022

3 minute read

Asia

With an out of work husband, housewife Sujeewa Nelum Perera is all too familiar with the struggle of feeding a family of four in Sri Lanka and has been forced to cut down on the number of meals they consume amid record high food prices, reported Reuters. 

Perera's husband, an autorickshaw driver, has been unable to earn any wages for two weeks now as dwindling fuel reserves in the country have prompted authorities to restrict fuel supplies to only essential services.

"We need about Rs. 2,000 ($5.50) per day for meals. But with food prices increasing daily we are down to about two meals," Perera, 38, told Reuters while shopping for groceries in Kelaniya, a suburb about 9 km (5.6 miles) from the commercial capital Colombo.

Sri Lanka's inflation rate stood at 54.6% in June, brought on in part by the worst financial crisis in decades, and economists say policymakers can do little to lower prices in the near future.

The island of 22 million people is wilting under a severe foreign exchange shortage that has left it struggling to pay for essential imports of fuel, fertiliser, food and medicine and has spurred people to take to the streets in protest. 

The crisis comes after COVID-19 hammered the tourism-reliant economy and slashed remittances from overseas workers, and has been compounded by the build-up of huge government debt, rising oil prices and a ban on the import of chemical fertilisers last year that devastated agriculture.

Food inflation reached 80.1% year on year in June while transport costs surged 128%, official data showed. 

With soaring food prices, 70% of households are now reporting reduced food consumption, UNICEF said in a statement earlier this month.

To consume a healthy diet as recommended by the World Health Organisation, a household must earn between Rs. 93,675 to Rs. 148,868, said Rehana Thowfeek, an economist specialising in tracking food inflation.

However, Sri Lanka's average household income is just Rs. 76,414 per month and the poorest 20% only earn Rs. 17,572, official data showed.

To make matters worse, most vegetable prices have more than doubled while rice, a vital staple, has increased from Rs. 145 per kilogram a year ago to Rs. 230.

'WORST TO COME'

Sri Lanka is in talks with the International Monetary Fund for a possible $3 billion bailout but it could take several months before a programme materialises. 

Analysts said inflation could peak in July but will continue to hover around 50% over the rest of the year.

"We expect an IMF programme in the latter part of the year. But even then inflation will only reach 10%-15% around June 2023," said Dimantha Mathew, analyst at First Capital Research.

The central bank increased rates by a record 700 basis points in April, to curb inflation and stabilise the currency but is expected to keep rates unchanged at the next policy announcement on 7 July.

"Sri Lanka is mostly dealing with cost-push inflation, especially from high fuel prices, so there is little the central bank can do to tame this," Mathew said.

In Kelaniya, Perera has been trimming costs by dropping pulses, fresh fish and chicken from the family's diet. Milk has also become a luxury item, including for her 12-year-old daughter and eight-year-old son.

"It's just too expensive. Even eggs I only make for the two children now. My husband and I go without. Prices will keep going up and we are told the worst is to come. I don't know how we will live."​

Source: Reuters