Bullock-cart solutions
View(s):
The news that bread and pastry prices will increase from next Monday hit the Kussi Amma Sera-household like a thunderbolt on Thursday morning.Venting her fury, Kussi Amma Sera confronted Aldoris, the choon-paankaraya who unfortunately happened to be coming down the lane at that time with his breakfast offerings. “Ah…..ah, den oyath ganan wedi karai. Kohomada janathawa jeevath wenne, jeevana viyadama wedi wenakota (Ah… ah now you will also increase your prices. How can the people live like this with the cost of living going up),” said an angry Kussi Amma Sera, pointing her finger at the hapless Aldoris.
“Aiyo Miss, mama mokak karannada. Mama bekariya
weda karanawa misa aithi karaya neme ne (Aiyo Miss, what can I do? I only work at the bakery. I don’t own it),” said Aldoris meekly.
Pitching into the argument, Serapina said: “Mama hithanawa bakeri godak salli hoya gannawa kiyala. Janathawata me davas wala jeevithe hari amarui ne (I think bakeries are
making a lot of profit. It’s very hard for people these days).”
Joining them was Mabel Rasthiyadu, who feeling sorry for Aldoris, said: “Meyata (Aldoris) dos kiyana eka asadaranai, wedi wena mila gena. Eya rassawak ne karanne [It’s unfair to blame him (Aldoris) for rising prices. He is only doing his job].”
On Thursday, the All-Ceylon Bakery Owners’ Association announced that bread prices will be increased by Rs. 5 a loaf, while prices of other bakery products will rise by Rs. 10. This was the second time in two months that bakery products have had a price-hike, the previous occasion being in mid-June when bakery products were increased by up to Rs. 10. The increase in both cases has been attributed to rising fuel prices and other costs.
As I watched the commotion at the gate, the phone rang. It was young economist Ruwanputha on the line. In the past few weeks, we have been having regular chats on the economy.
“Did you see the news about firewood being sold online due to the fuel crisis?” he asked.
“Yes, apparently online retailer Kapruka is offering firewood and there is a demand for it,” I said.
Founder and Chairman of Kapruka.com Dulith Herath had said in his Facebook account: “We never imagined we would be selling firewood online. But it is selling pretty fast.”
This unusual demand is probably due to the shortage of gas in recent weeks with long queues at gas outlets after Laugfs Gas stopped imports as it was not given a price hike.
Continuing the conversation, Ruwanputha said the economy is facing two major problems – a fuel crisis and a foreign exchange crisis. “On both fronts, our policy is heading in the wrong direction,” he said.
Adding to the chaos in the foreign exchange markets this week was a statement by Energy Minister Udaya Gammanpila that due to the forex crisis, the country is short of dollars for fuel imports.
Issuing a Twitter message, he urged the people (motorists)
to use fuel sparingly and restrict their travelling to a bare minimum.
Fuel prices have been rising in the global market. In 2019 alone, the foreign exchange used on oil imports was US$3.67 billion. The funds spent for fuel imports were reduced to $2.32 billion in 2020 due to the ban on vehicle imports and the reduction in international oil prices to $45.57 per barrel in 2020 from the previous price of $68.80 per barrel in 2019. However, this year the price of a crude oil barrel has exceeded $70.
I asked Ruwanputha what he thought about the minister’s plea. “All bunkum! They (ministers and parliamentarians) should set an example first, before asking the people to tighten their belts,” he said, adding: “If they want people to use less fuel why are they importing new vehicles (as announced by a Cabinet co-spokesman this week)?”
“These ministers should reduce the number of vehicles that they use including their escort vehicles and themselves resort to austerity measures before asking the people to tighten up,” I said, adding that some politicians are plundering and looting the nation even during a pandemic.
While the twin crises of fuel and foreign exchange have heavily impacted on the economy, ministers painfully try
to project that the economy is on track for higher growth
this year.
While the government has allowed Laugfs Gas to increase its price of a 12.5 kg domestic cylinder to Rs. 1,856 from Rs. 1,493, the shortage still persists. The Litro gas price remains the same though the state supplier is also losing heavily due to the rise in overseas gas prices.
The forex crisis came to a head this week with the US dollar trading at over Rs. 210 in the inter-bank market, much higher than the Central Bank ‘gentlemen’s agreement’ rate of Rs. 202, which is a rate that banks are urged to follow under the practice of ‘moral suasion (act of persuasion)’.
In the kerb (money exchange) market, traders were selling the dollar at over Rs. 230. On Wednesday, the Central Bank urged commercial banks not to ‘devalue’ the rupee, saying it had observed messages being circulated claiming that licensed banks have officially been asked to devalue the Sri Lanka rupee with immediate effect.
“The general public is hereby informed that there is no basis whatsoever for such claims and the Central Bank has not made any change to its stance or the operational arrangements on the determination of the exchange rate,” the banking regulator said in a statement.
Importers have been having huge problems – running from one bank to another – to find dollars to pay their bills. Letters of Credit are being rationed by banks and in most cases the best customers are given preference.
Another sector that is badly affected is overseas education for Sri Lankan students. Dozens of students are stuck overseas as their parents are unable to get enough dollars from banks to pay overseas fees. In one instance, over 30 students who required $3,000 each for an immediate overseas placement were compelled to seek these funds from the costly kerb market.
In a statement on Thursday, the Central Bank said limited conversion by “exporters and the advancing of imports together with some speculative activity, prompted by anomalies between interest rates on the rupee and foreign currency products in the financial market, exerted undue pressure on the exchange rate in the domestic market”.
The forex problems are not going to run away easily. In the next three to four years, Sri Lanka still has huge foreign debt payments to be made and with the pandemic showing no signs of ending, today’s situation in the forex market is likely to continue for a long time.
I ended my conversation with Ruwanputha on a lighter note, saying: “With firewood coming into the picture, our Energy Minister must be wanting people to use the old ‘bakki karaththe (bullock cart)’ as the mode of transport”.
Ruwanputha was puzzled by the use of the word ‘bakki karaththe’ but when I explained the mode of transport in the 1950s, he laughed.