Sri Lanka declares economic emergency to control increase in food prices amid forex crisis

Sri Lankan President Gotabaya Rajapaksa on Tuesday declared an economic emergency to stem the increasing inflation after a steep fall in the value of the country’s currency drove a surge in food prices. Sri Lankan President declared the state of emergency under the public security ordinance in order to avoid the hoarding of essential food items such as rice and sugar. The emergency, as per PTI, came into effect from midnight on Tuesday. 

“The president has promulgated emergency regulations under the Public Security Ordinance on the supply of essential goods,” presidential spokesman Kingsley Ratnayake told reporters as per PTI.

Meanwhile, the Sri Lankan government has appointed a former Army general as commissioner of essential services. The official will have the authority to seize the food stocks held by traders and retailers in order to regulate the soaring prices. The country’s military will also be overseeing the action that gives power to officials to ensure that the essential food items are sold at the price guaranteed by the government. 

Govt-guaranteed prices based on import costs

Ratnayake said that the government-guaranteed prices which are reportedly based on import costs at customs and prevent the hiding of stocks. The imposition of a state of emergency came after the country witnessed a steep increase in prices of sugar, rice, onions and potatoes. The sudden rise in cost was accompanied by long queues outside the stores because of the scarcity of milk powder, kerosene oil and cooking gas. The wide-ranging move by Rajapaksa is also expected to recover the credit owed to state banks by importers. 

As per PTI, the prices of most of the essential goods have been skyrocketing owing to the plunging local currency value and high global market prices are driven by the COVID-19 pandemic. Meanwhile, the Sri Lankan government has blamed the traders for hoarding. Reportedly, the Sri Lankan rupee has fallen by 7.5% against the United States dollar in 2021. Further, Sri Lanka’s central bank recently increased interest rates in a bid to shore up the currency.

The bank has also noted that the island country’s foreign reserves plunged to $2.8 billion at the end of July from $7.5 billion in November 2019 when the government acquired the office. Sri Lankan rupee has lost over 20% of its value against the US dollar in that time. 

(With PTI inputs)

(Image Credits: AP)