Friday, October 08, 2021

Sri Lanka's Economy Bust

In Sri Lanka a shortage of foreign currency has caused shortages of food, medicines and other essential items for the island nation of 21 million people.

The country's government declared a state of emergency over the food shortages on August 31 and imposed rationing and forced farmers to sell their rice to a state agency and seized some from private warehouses. During rationing, state stores sold only one kilogramme (2.2 pounds) of rice for each person. Sugar and lentils were similarly rationed. Virtually all private traders withdrew from the market. But the shortages worsened. 

Now the Sri Lankan government has ended price controls on essential foods in a bid to end black-market trading and deregulate prices for milk powder, wheat flour, sugar and liquified petroleum gas hoping it would increase supplies.

“Prices could go up by as much as 37 percent across the board, but it is hoped dealers will not make unconscionable profits,” a trade ministry official said.

The price of a kilo of imported milk powder was increased by more than a third to 1,300 rupees ($6.5). The price of gas is also due to rise by about 35 percent.

The government banned imports of non-essential goods, including vehicles, spare parts and appliances in March 2020 because of currency shortages.

Sri Lanka was already suffering from heavy foreign debt repayments. Sri Lanka’s foreign reserves stood at $3.55bn at the end of August. It has to repay about $2bn in foreign debts before the end of the year.

Sri Lanka allows sharp rise in food prices to ease shortages | Food News | Al Jazeera

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