Sri Lanka on Tuesday has declared a state of emergency after basic food supplies began running low as a foreign exchange crisis in the country sees private banks struggling to pay for imports. The country is suffering a hard-hitting economic crisis.
President Gotabaya Rajapaksa has ordered emergency regulations to counter the hoarding of sugar, rice, and other essential foods.
Rajapaksa has named a top army officer as “Commissioner General of Essential Services to coordinate the supply of paddy, rice, sugar, and other consumer goods”.
This had led to sharp price rises for sugar, rice, onions, and potatoes, while long queues have formed outside stores because of shortages of milk powder, kerosene oil, and cooking gas.
The government has increased penalties for food hoarding, but the shortages come as the country of 21 million battles a fierce coronavirus wave that is claiming more than 200 lives a day.
The country’s economy shrank by a record 3.6 percent in 2020 because of the pandemic and in March last year, the government banned imports of vehicles and other items, including edible oils and turmeric, an essential spice in local cooking, in a bid to save foreign exchange.
Importers still say they have been unable to source dollars to pay for the food and medicines they are allowed to buy.
Two weeks ago, the Central Bank of Sri Lanka increased interest rates in a bid to shore up the local currency.
Long queues to buy milk powder, sugar, and cooking oil have been reported from various parts of the nation amid rising COVID-19 cases and a 16-day curfew until next Monday.
According to the Associated Press, a huge trade deficit has been deepening the country’s financial quandary for years. Therefore, the nation last year banned or licensed hundreds of foreign-made goods, including toothbrush handles, Venetian blinds, strawberries, vinegar, wet wipes, sugar, and even a staple spice turmeric, to save on the remaining forex reserves. The nation has been under the worst import controls since the 1970s.
Due to the coronavirus pandemic, the tourism sector has also suffered tremendously in the country which was a major source of foreign exchange earnings.
Sri Lanka’s foreign reserves fell to $2.8 billion at the end of July 2021, from $7.5 billion in November 2019 when the government took office.
Energy minister Udaya Gammanpila has appealed to motorists to use fuel prudently so that the country can use its foreign exchange to buy essential medicines and vaccines.
An adviser of the president has warned that fuel rationing may be introduced by the end of the year unless consumption was reduced.
