Since President Gotabaya Rajapaksa was elected to power on 16 November 2019 and prior to last week’s rupee devaluation and its subsequent depreciation, the prices of a number of imported essential items, discounting locally grown/produced/manufactured produce and products, have sharply increased.
For instance, the price of a 400 gram pack of milk powder being increased by Rs 145 (36.71 per cent) to Rs 540 and that of a kilo pack by Rs 360 (36.55 per cent) to Rs 1,345. This is prior to the rupee devaluation.
Further, the price of a 12.5 kg domestic cooking gas cylinder has increased by Rs 1,017 (58.68 per cent) to Rs 2,750. Retail prices of State-owned Ceylon Petroleum Corporation (CPC) comprise an increase of Rs 40 (29.2 per cent) to Rs 177 a litre of ordinary petrol (92 octane), ordinary diesel (auto diesel) by Rs 17 (16.3 per cent) to Rs 121 a litre, and kerosene also by Rs 17 (24.3 per cent) to Rs 87 a litre.
Meanwhile, bus fares have seen the minimum rate for adults increase by Rs 5 (41.67 per cent) to Rs 17, at the second station level by Rs 6 (42.86 per cent) to Rs 20, third station level by Rs 8 (29.63 per cent) to Rs 27, fourth station level by Rs 10 (43.48 per cent) to Rs 33 and at the fifth station level by Rs 11 (39.29 per cent) to Rs 39.
But despite these sharp increases, items such as milk powder, cooking gas, ‘CPC fuel’ and even certain types of medicines, including basic medicine, are either in short supply or not available at all, causing further burdens on the poor.
Making a bad situation worse, Central Bank of Sri Lanka (CBSL) after administering the exchange rate (ER) at Rs 203 to the US dollar since 6 September 2021, in a vain attempt to get the better of the black market, devalued it by a record Rs 27 (13.30 per cent) to Rs 230 after a lapse of 183 days on Tuesday. The black market at that time was selling dollars at Rs 250 a greenback, still, a premium of Rs 20 over the new value of the legal ER effected on Tuesday.
Previously, the sharpest devaluation the ER was subject to was Rs 8.50 (113.33 per cent) to Rs 16 to the dollar from its previous value of Rs 7.50 executed by then Finance Minister Ronnie de Mel when presenting the ‘1978 Budget’ in Parliament 45 years ago on 15 November 1977.
However, the present Government’s/CBSL’s devaluation didn’t work, with the black market correspondingly depreciating the ‘black market ER’ by Rs 10 to Rs 260 to the dollar, effectively making the legal ER of no value, other than being of ‘book value!’
That resulted in the Government/CBSL to throw in the towel by allowing the ER to free float, beginning Thursday, resulting in the ER depreciating sharply by Rs 35 (15.23 per cent) to Rs 265 and by a further Rs 10 (3.77 per cent) to Rs 275 to the dollar by Friday. The ER by last week alone has increased by Rs 54 (26.60 per cent) to Rs 275 to the dollar.
On the eve of President Gotabaya Rajapaksa’s election to power the ER was at Rs 180.30 to the dollar. Since then, in a space of under a mere two years and four months, the ER has depreciated by Rs 94.70 (52.52 per cent) to Rs 275 to the dollar.
Consequently, it was announced on Friday that medicinal drugs will be increased by 29 per cent, bread prices by Rs 30 (42.86 per cent) a loaf, and a possible increase of bakery products by Rs 10 per unit and a packet of an ordinary meal of rice and curry by between Rs 20-30.
Bus fares, which like ‘CPC fuel,’ milk powder and cooking gas are regulated, have seen private bus operators requesting the authorities to increase the minimum bus fare rate for adults by Rs 13 (76.47 per cent) to Rs 30 per ticket, from the current price level of Rs 17 per ticket and an overall bus fare increase of 50 per cent in the event CPC increases its fuel prices..
Subsequently, Lanka Indian Oil Corporation (LIOC), a Government of India enterprise, hiked the price of a litre of ordinary diesel by Rs 75 (53.96 per cent) to Rs 214 a litre and ‘ordinary’ petrol by Rs 50 (24.51 per cent) to Rs 254 litre, effective from Friday. CPC, which has the bulk of the market, has, at the time of writing not hiked fuel prices.