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Food for thought

The IMF recently praised Sri Lanka for bringing inflation under control. But on the streets, the price of food has been rising relentlessly.

Increases are seen in the price of wheat flour, bread, rice, vegetables, coconut, coconut oil, big onions  and red onions.

The cause? A combination exposure to global prices in the wake of IMF reforms, and the Sri Lankan state's ham-fisted efforts to fix prices in favour Sinhala producers and consumers at the same time. 

A few months ago the Sri Lankan Government responded to complaints about the soaring price of wheat (which is imported) by encouraging people to eat rice.

The argument is made that bread ‘is not Sri Lankan'. One recent newspaper article argued bread is not only a ‘Western’ food, but that it is damaging to one’s pancreas and explaining what alternatives to wheat flour can be used!

Now the Government has gone a step further and has started banning wheat products at government canteens. Health Minister Maithripala Sirisena has reportedly taken this decision to discourage the use of wheat products and 'wean' the population off bread and bakery goods.

In the meantime efforts are under way to encourage rice cultivation and reduce the dependency on wheat products. The Government has reportedly set aside $22m (Rs 2.5 billion) to invest in this program.

Economic Development Minister Basil Rajapakse claims that the country can be self sufficient in rice production by the end of the year.

But even the much promoted humble rice grain is moving beyond the reach of many ordinary people.

The government has traditionally kept rice imports low to aid Sinhala landowners, but the current crisis, and IMF emphasis on liberalised markets, has forced it to relax import regulations, which in turn is likely to affect farmers and rural workers dependant on rice production.

The government has now increased investment in the local rice industry to avoid the looming scenario in which  the Sinhala population cannot afford to buy neither bread nor rice.

But it gets worse. Prices of poultry have seen sharp rises due to artificially high prices for grain (which is used as feed).

The Sri Lankan Government is now forced to import chicken and eggs, whilst imposing price controls.

Loans are being given through state banks for breeding farms and small farmers.

Sri Lanka pushed up import duties on maize to 'protect' Sinhala grain farmers, which in turn raised the price of feed, driving many chicken farmers out of business last year.

A protein substitute for chicken would be fish but fish prices have also increased greatly.

Tourists are even being blamed – they reportedly consume larger volumes of protein, driving prices up.

Even coconuts are being imported because of high prices due to trade protection for cultivators.

However there are some good news. If you like onions, that is.

President Mahinda Rajapakse has ordered measures to reduce the cost of living. So Secretary of the Ministry of Cooperatives and Internal Trade Anura Sriwardena has announced a relaxation of import taxes on onion and potatoes.

However, the import taxes were imposed by the government to sustain prices during the harvesting period of the local potato and big onion farmers.

A managed economy, indeed.