Cheese, Wine & Chocolates Amidst a Deepening Dollar Crisis

By Shivanthi Ranasinghe | Published: 2:00 AM Nov 29 2021
Columns Cheese, Wine & Chocolates Amidst a Deepening Dollar Crisis

By Shivanthi Ranasinghe

As the saying goes, when you hit rock bottom there is only one way to go and that is up. Sri Lanka has hit rock bottom with the onslaught of the COVID-19 pandemic. However, it seems we are trying to dig deeper than making an effort to climb up. 

One of the first casualties of the pandemic was our tourism industry. It was already reeling after the devastating Easter Sunday attack. At the onset, the newly-elected Gotabaya Rajapaksa Administration, even with a small team caretaker Government, took timely measures to protect the country. In fact, Sri Lanka was named the second safest travel destination. 

Unfortunately, at the time health experts and authorities did not have adequate knowledge of the virus. Initially, it was believed that an infected person could be detected with body temperature. The fact that an infected could be asymptotic but still contagious was realised much later. 

The second casualty, which was almost simultaneous with the collapse of the tourism sector was the remittance from Sri Lankan expatriates. Instead of money sent into the country, the new Government had to spend on evacuating citizens from epicenters of the pandemic and resolving issues faced by other citizens who were stranded abroad. Many lost their jobs and had to seek shelter in the embassy. 

The matter was further complicated by those citizens who did not have the necessary paperwork to establish their identity. Especially with the rise of Islam extremism, the embassies in Muslim countries had the added responsibility on correctly verifying their identity. 

The returning Sri Lankans had to be quarantined for two weeks. The cost of which was shouldered by the Government. The first ring of contacts of the infected was also likewise quarantined and again the Government had to foot the bill. 

Soon thereafter, the new Administration was forced to lockdown the already debt ridden country. With this lockdown, the Government had to ensure essentials still reached the people and the vulnerable communities were looked after. At the same time, the Government was in a race to prevent the spread of infection and increase the health sector capacity. 

Soon after the COVID-19 vaccine was introduced, the Government made sure to be in the front of the line to get the vaccine. Sri Lanka has one of the best vaccination programmes in the world and is one of the first countries to vaccinate its population fully. 

The military played a pivotal role from the beginning in every aspect of controlling the pandemic. It was the military that established and managed the quarantine centres, traced the infected with their first and second ring of associates, supported the essential service providers and carried on the vaccination drive when the nurses resorted to trade union action. 

Even with these timely measures and efficiency, the country endured three cycles of lockdowns. Throughout this trying time, the Government continued to service the enormous financial commitments. Just before the third lockdown, the Government transferred funds amounting to a whopping one billion dollars to honour a bond. 

Before enforcing the last lockdown, President Gotabaya explained the dire economic situation before the country. He warned that we may all have to make sacrifices in the months to come. This pronouncement was not taken well by the people. 

The Unfolding Economic Calamity 

Today, the country is struggling to find funds to import essentials as fuel, gas and medicine. According to the Energy Minister Udaya Gammanpila, the decision to temporarily stop importing crude oil was in a bid to save our dwindling foreign currency to import essentials. 

The supply of gas is also uncertain, despite the best of effort to ensure an uninterrupted flow. The mysterious explosions of gas cylinders add to our concerns. Litro Gas Lanka has assured the quality of the recently-produced cylinders. Yet, the four explosions that took place in quick succession is certainly a worry. 

The most contentious matter in this whole situation is not the loan burden, lack of foreign currency or even the uncertainty over essentials as energy and medicine. It is the uninterrupted availability of non-essential imports such as dairy products, fruits, confectioneries and other luxury foods. 

This is indeed an interesting phenomenon. We have lost all our main avenues for earnings forex revenues. The local economy is also uncertain with the pandemic returning in new variants - usually the latest proving to be more infectious and deadlier than the previous. Cost of living has increased exponentially, primarily because world market prices have also increased. Even though the country was in a lockdown for the better part of last year and this years, our fuel bill has seen a drastic increase. 

Our bill for the first nine months of this year has increased by USD 691.7 million compared to the corresponding period in the past year. The reason we paid USD 2,596.8 million just for fuel was due to increase in world market prices for fuel. This increase comes at a time when most of our movement was curtailed or restricted. 

This is after all a global crisis. All systems and economies have been upended. Millions across the world have lost their jobs and homes. None of these are State secrets. We are all aware of the grave situation before the country. Yet, the presence of imported goods, primarily luxury items speaks of an utterly irresponsible society. The Government may be entrusted to manage the economy. That however does not mean the citizen is without responsibility. If there is no demand for imported products, especially if locally-produced goods are available, then importers and distributors too will curtail their sales. 

Reasons for Our Grievances

At the recent debate on the Appropriation Bill for 2022, Minister Gammanpila observed that the current economic maladies is a culmination of bad financial management since year 1955. He noted that every Government that had been in power since 1955 is responsible for our present economic vulnerability. Minister Gammanpila made two succinct observations. We are in the habit of spending money we do not have in our hand. Indeed, every Government has simply passed on a trade deficit to its successor. Though our forex revenues have dried up, according to the Central Bank our trade deficit has increased to USD 

6 billion within January to September, 2021. During this period while our income from exports have grown by 20 per cent, our expenses from exports have increased by 26.8 per cent. As we persist in importing more than we export, we continue to put our foreign reserves under duress. 

He also pointed out that every Government since 1955 had only strived to address the issue at hand without considering long-term consequences. Our democratic system is such that no Government in power can afford to take unpopular decisions. If they fail to address an issue immediately, the Opposition makes a capital case out of it. The people, too, are very particular that they do not tolerate inconvenience. 

The scarcity of turmeric during last year is a case in point. The reason for this scarcity was the Government’s decision to ban turmeric imports. Some traders had been exporting imported turmeric to enjoy benefits from trade agreement between Sri Lanka and India. By exporting cheap import varieties these traders were not only harming the brand value of turmeric grown in Sri Lanka but also hurting the genuine traders. The brouhaha caused by the Opposition and the frustrations expressed by the consumer overrode the importance of this ban. 

If we are to Go Up

It is obvious that our paramount duty is to strengthen our economy. To do so, we must understand the root causes. 

Dependency on Imports

We ousted the British forces occupation in 1948. However, by that time we have already shifted our habits and have become dependents on imports. We have expanded our diet to include wheat-based food. As wheat is not produced in the country, we must import it. Over the decades, breads and pastries have become an integral part of our diet. Thus, even the five rupee increase in wheat based products severely affect us. We have increased the variety of wheat based products and enjoy items as pastas, pizzas and burgers. 

On the other hand, we do not enjoy our rice-based varieties as much. In almost every bakery we find pastries of all sorts. The fried items are often fried in reused oils that can be carcinogenic. That however does not deter the consumer. Yet, almost none of the bakeries sell items like ibulkiribath - milk rice buns stuffed usually with caramelised coconut. This is such a shame as this is the healthier snack than the cutlet or patties. 

Our main sector is agriculture. In that too, we are dependent on the imported agrochemicals. The incumbent Government’s efforts to reverse this practice and reintroduce organic fertiliser had not yielded the desired results. 

Vindictive Nature

It is unfortunate that the base of our politics is vindictiveness. Our politicians main ride is divisiveness. Tamil politicians try to estrange the Tamil communities from the Sinhalese. Muslim politicians are trying to promote Muslim laws over the country’s laws. The Sinhala politicians try to gain points on economic differences. 

Perhaps, the divisions created on economic grounds is the worst. Politicians like to portray entrepreneurs and investors as rogues. The case of SAITM - the private medical college is a classic example. Yearly, thousands of our children leave to medical colleges in neighbouring countries. These degrees and post-graduate studies they read are of dubious standard. To pursue their tertiary education, they take our foreign reserves. 

It is in this context that we must look at the SAITM saga. The fact that SAITM included a medical faculty was on the suggestion of the University Grants Commission. Instead of supporting such a venture and ensuring that the highest standards are adhered to, the whole operation was shut down on the foolish premise that entrepreneurs would do anything for profit.  Had the medical faculty in SAITM was allowed, it would have brought in the much needed forex into the country as undergraduates from neighbouring countries enroll in the facility. 

Myopic Vision

We are unable to see beyond our nose. The pandemic that upended the current systems offered us the opportunity to rectify existing issues in our systems. Education is one such sector that we could have revolutionised. As we shifted to homeschooling with modern technology as the Internet, the education ministry too could have shifted its gears. There are many avenues to earn a profitable revenue on the Internet. With simple animation and digital art, even one with modest creative skills can earn a good income by designing e-cards. Sold on the Internet, the revenue would be in American dollars. 

Our failure to highlight our Buddhist heritage is unfortunate. We are only focused in our beaches and ruins. Buddhism is seen as an extraordinary philosophy and many in wealthy countries are showing an interest in it. There is an inward trend on mental health and rejuvenation and as such yoga and meditation is attracting a lot of attention. 

The environment and especially global warming is a big topic in the world today. Scientists are warning that the ice caps are melting faster than the predicted rate. The climate change is becoming more and more perceptible. 

Major international insurance companies are now insisting that industries where environment is polluted take responsibility. Therefore, sectors like airlines must now prove that they are offsetting their carbon emissions to the environment. Known as carbon credits, these companies are now opting to fund programs such as reforestation. The carbon emissions that would be offset by these projects is calculated as a currency. 

The best part of this project is that the local community is educated and armed with technology to protect their environment. With smart technology these civil forces can detect illegal logging and poaching. While creating new jobs and investing in rainforests, these conglomerates do not take anything from the ground despite the huge monetary investments they make. The natural resources are protected and not looted. 

These are the new thinking that we can capitalise. Instead of focusing on the way of life, we had been leading, we need to think progressively and creatively. Whether a situation is a problem or a challenge depends on our attitude. Sri Lanka’s economy is weak. This has been the case for over nearly three quarters of a century. We have not been able to move forward because our focus is on the mistakes committed by the past Governments. Any decisions taken by a Government in power is met with criticism and ridicule. Taking the country forward lies with not only the Government in power but in all of us. 

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By Shivanthi Ranasinghe | Published: 2:00 AM Nov 29 2021

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