Aid Critically Needed

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Tea, Sri Lanka’s third largest foreign exchange (FX) earner after garments and remittances, though not necessarily in that order according to latest official data, is currently suffering from two factors  that is bringing it down.

Tea export earnings in the first quarter (1Q) of the year fell by 16 per cent (USD 53 million) to USD 288 million, year on year (YoY); tea production in the first two months of the year by 10 per cent (4.7 million kg) to 41 million kg, tea export volumes in the 1Q of the year by 18.9 per cent (6.2 million kg) to 63.7 million kg and FOB prices of tea in the review period, down by 7.4 per cent (USD 0.36) to USD 4.52 a kg., respectively. 

Tea production has been falling since November 2021, while tea prices, even longer, since June 2021. The decline in tea production is due to President Gotabaya Rajapaksa banning imported chemical fertiliser in April 2021, though subsequently rescinding that order in November 2021, but too late to reverse the current damage.

Meanwhile, falling tea prices are attributed to sanctions on two of Sri Lanka’s major tea importers, Iran, because of its nuclear programme, sanctions of which were however removed by the US in February 2022 and sanctions on Russia imposed in February 2022 because of its invasion of Ukraine.

This is taking place when Sri Lanka is in throes of an FX crisis that has resulted in the country being afflicted by daily hours-long power cuts, shortages or complete absence of essentials including medicines, fossil fuels which comprise cooking gas and coal for electricity generation, milk powder and foods as Sri Lanka is an import dependent economy.

As a complementary feature to the FX crisis, the economy is beset by long queues; black markets; bribery and corruption and soaring cost of living. That has led to socioeconomic instability, resulting in the Police shooting which killed a protester in Rambukkana and injured 14 others a few days ago.

Sri Lanka is buckling under pressure due to mass demonstrations and protests due to these economic afflictions and only a spark is needed to cause a bigger conflagration similar to the Arab Spring of 2011-2012 and the 1979 Iranian Revolution that resulted in the deaths of hundreds of innocent civilians. 

A reflection of the gravity of the situation is that after a lagged effect and even before the FX crisis and, prior to that, the Covid-19 crisis of 2020 as well, Census and Statistics Department (CSD) which released Sri Lanka’s 2019 Poverty Statistics this week showed that the country’s poverty headcount registered a double digit figure of 14.3 per cent, on the basis that a minimum amount of Rs 6,966 is needed per person, per month for them to stay out of poverty.

The largest poverty headcount district wise was in Mullaitivu (44.5 per cent) and lowest, Colombo (2.3 per cent); sector wise, highest, Estate (33.8 per cent), Rural (15 per cent) and Urban (six per cent) and percentage of households in poverty, Estate (29.7 per cent), Rural (12. 6 per cent) and Urban (4.4 per cent), respectively.

Meanwhile, nationwide inflation for the first time after 13-and-a-half years hit over 20 per cent, by accelerating for the sixth consecutive month to 21.5 per cent last month, CSD data released yesterday showed. A number higher than this last took place in September 2008 with a figure of 24.3 per cent, a period when Sri Lanka’s war with the LTTE had reached a climax, while food inflation accelerated to 29.5 per cent in March 2022 hitting a 13-year-and-seven-month high. Food inflation last showed a higher figure in August 2008 (32.1 per cent), on the eve of the Global Financial Crisis and the Great Recession.

Meanwhile, non-food inflation soared to a 13-year-and-four-month high of 14.5 per cent in March 2022, where non-food inflation last showed a higher figure than this was in November 2008 (16.8 per cent). Therefore, it’s critical that Colombo reaches out to the international community for succour before it’s too late.