In Sri Lanka’s biggest economic slump, the soaring inflation might not have surprised you by now, though it has come down recently.
Prices of essential goods skyrocketed, but there is a gradual reduction with the sharp drop in fuel and LP Gas prices. This is a welcome relief for the consumers who bore the brunt of the high Cost of Living (COL).
We have never been agriculturally self-sufficient in living memory (notwithstanding a bumper paddy harvest in some years) and a sudden halt in chemical fertiliser imports sent farmers into widespread disarray. According to the World Food Program’s (WFP) latest despatch, nearly 32 percent of households in Sri Lanka are food insecure. This is not old data. This is as recent as January, 2023.
The report further finds that households across the country continue to turn to food and livelihood-based coping strategies. Seven in ten households (73 percent) are adopting food-based coping strategies, and 68 percent of households are consuming less preferred food.
Prime concern
The WFP finds that food and fuel prices remain a prime concern for many households. Fifty-one percent of households are purchasing food on credit. The Government took heed of the situation and recently imported two million eggs from India to ensure some sense of food stability. One of the most comprehensive tools that showcases the peaks and lows of price fluctuation was an inflation tracker developed by Watchdog Sri Lanka.
The organisation relied on information from the Department of Census and Statistics of Sri Lanka which collects data on weekly average retail prices of roughly 120 food items from markets in the Colombo District.
The categories are based on the nutrient profile model for Sri Lanka from the Ministry of Health. Although the tracker is interactive and provides data that drives visualisations, only a few snapshots are used for the purpose of detail in this story.
According to this data, the cost of a meal consisting of fried rice - chicken for four people, had shot up from Rs.165 in 2018 to Rs.319 in 2023. The highest was Rs.374 in September 2022 when the import bans came into effect in the country.
Now let’s look at how a plain square meal has changed over the years. The price of a meal of rice, comprising Nadu rice, dhal, canned fish, long beans curry and pol sambol has gone from Rs. 704 in 2017 to Rs. 1458 in 2023. (There should be a reduction in these prices following the recent price reductions).
Family unit
This is just the cost of preparing a meal excluding LP Gas, labour or storage losses. Imagine the cost a family unit has to incur if they had to feed four mouths for several weeks.
Let’s look at the price of bread and roti, staples by Sri Lankan standards. That too shows an exponential increase. The price of bread in 2017 was Rs.59 and it went up to Rs.200 towards the latter part of 2022. Now it has come down to Rs.160. The price of Roti in 2017 was Rs.45 in 2017 which then shot up to Rs.118 in February 2023.
Costs of food changes based on many factors - lack of dollars to import certain foodstuffs, lack of fuel (fuel imports have now been streamlined), a lack of electricity to keep some industries running (this issue has now been addressed), and even an agricultural crisis unfolding due to a disastrous policy around fertiliser imports; combinations of yield, transport costs, import costs, supply and demand all play a part in this.
As is, we rely on many imports for even our most basic meals. For example, wheat - which we need for bread - is imported. Our beloved dhal, too, is an import; according to the UN Comtrade database, in 2021, we imported approximately 1.3 million metric tons of wheat, at a cost of little over US$ 433 million.
A large amount of both wheat and pulses come from Canada, India, and Australia. As the Sri Lankan Rupee fell compared to the dollar, these commodities became more and more expensive. These prices should come down with the recent appreciation of the Rupee.
Meat is getting increasingly expensive with various supply chain problems (including chicken feed) affecting the industry.
Likewise for fish, most likely due to the fisheries industry being hard-hit by the fuel crisis. Tinned fish and Salayo occupy the bottom of the cost-increase hierarchy, though both have come down in price in recent weeks.
Biggest market
Milk has consistently been a dependency for Sri Lanka; we are New Zealand’s biggest market. During the 2021 Budget reading, it was stated that we spend around US$ 300 million per year importing milk.
Plans were announced to shift this to local production, including tax concessions for large investments. However, officials have noted that it may take up to a decade for local milk production to actually match Sri Lankan demand; this is not something that’s going to happen overnight. There has been a marginal reduction in milk powder prices in the local market.
When you take a good look at these numbers, you realise why many households are taking drastic measures to cut back on meat or fresh produce.
According to the Institute of Policy Studies (IPS) in Sri Lanka long-term strategies are needed to counter the underlying causes of food insecurity and ensure sustainable domestic production and swift action must be taken to tackle the challenge of ensuring that people do not go hungry.
Supporting immediate food needs amid the prevailing economic crisis requires a twofold effort: protecting the (1) poor and (2) farming community.
In this regard, targeted measures to support the poor and near-poor through policy interventions and strengthened social safety nets are vital. Even the International Monetary Fund (IMF), which recently agreed to disburse US$ 2.9 billion to Sri Lanka, has stressed the need for a safety net for vulnerable segments of the populace.
The Government has already allocated funds in this regard; however, successful implementation depends on accurately identifying groups at risk of hunger and providing them with immediate food assistance through subsidised products or cash transfers.
Reasonable prices
Protecting farmers’ livelihoods requires the adequate availability of fertiliser at reasonable prices. More efficient use of fertiliser and high-quality seeds also play a role in ensuring that limited supplies last longer. This will secure a harvest that can better support domestic demand during the next season.
The Government can also repurpose idle land for crop production and encourage small-scale sustainable farming.
Given the debt crisis, although import restrictions on certain foods are needed, they tend to be counterproductive. Besides, the Middle Class has taken some imported foods such as apples for granted.
Stricter regulations should be in place to ensure that consumers are not overcharged for high-demand items, as was evident for milk powder and fuel earlier this year.
Minimising the high levels of Post-Harvest Losses (PHL) and food wastage (approximately 3,963 tonnes per day) also plays a crucial role in satisfying immediate food needs. Sri Lankans must get used to the concept of cooking just enough for a meal and then consuming it all to minimise food losses.
A food crisis during an economic crisis is a catastrophic scenario. Given that over one-third of the population is food insecure, it is imperative that Sri Lanka promptly takes corrective action.