Dreary times, catchy tunes
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As I woke up this Thursday morning, I heard a catchy tune from a radio blaring in the neighbourhood. Walking into the kitchen, I asked Kussi Amma Sera whether she knew that song.“Ow Sir. Eh ‘Polime’ sinduwane (Why Sir, that is the ‘Polime’ song),” she replied. I quickly googled the song which is doing the rounds on social media, and listened to it. It’s a new song titled ‘Polime (Queue)’ by Chithral Somapala and Piyal Perera and the Gypsies, both coming from generations that have been in the music scene for decades. Piyal has taken over the role of his late, popular brother Sunil in spicing up a song with comedy and humour along with genuine concern that reflects the malady of queues that has engulfed Sri Lankans. Interested? Then listen to it at https://www.youtube.com/watch?v=m0lL-Wagg3Q&ab_channel=Torana
This was a nice start to column-day which, however, focuses on dismal happenings in Sri Lanka’s economy with reports that the era of queues might continue for the next 12 months. This week’s issues that drew my attention were the rate of inflation which is rapidly rising like a tuk-tuk meter and a dispute over whether exporters are repatriating their earned dollars or parking them in overseas accounts. The Central Bank has accused some exporters of keeping their money abroad while chambers representing exporters are hotly disputing this claim, challenging the authorities to prove this and bring the culprits to book!
Apart from these issues, hundreds of people are losing jobs due to the present economic crisis which is largely affecting small and medium-scale businesses with some flying to Dubai on a 3-month visa to find a job.
Inflation has dogged this country for many months and with billions of new money printed weekly to meet rising state spending, inflation has shot through the roof with prices rising to unbelievable levels. Interest rates (over 20 per cent in the market) are also rising but are no match for current inflation rates which some years ago were below double digit levels.
According to the Department of Census and Statistics, Sri Lanka’s food inflation (year-on-year) surged to 90.9 per cent last month from 80.1 per cent in June 2022, while Non-Food inflation (Y-o-Y) increased to 46.5 per cent in July 2022 from 42.4 per cent in June 2022. The annual average inflation rose to 23.1 per cent in July from 18.4 per cent in June, while core inflation (Y-o-Y), which reflects the underlying inflation in the economy, increased to 44.3 per cent in July from 39.9 per cent in June 2022.
Experts said inflationary pressures are due to a combination of factors including rising money printing and the free float of the exchange rate. According to the latest World Bank assessment, Sri Lanka is among 10 countries with the highest food inflation in the world.
Meanwhile, in another statistic that drew our attention, usable foreign reserves (money available to be used for imports or debt payments – which have now been suspended) were recorded at less than US$500 million in June. However, on the positive side – though needing further examination on the reality – Sri Lanka recorded a trade surplus of $21 million for the first time in 20 years, registering high monthly export earnings and a decline in import expenditure. If other foreign exchange earnings – worker remittances and tourism – are added that would take the forex advantage much further.
At this moment the phone rang. It was my jolly-mood economist-friend, Sammiya (short for Samson). “Hey it’s good you called because I am trying to unravel this puzzle as to why we are struggling for dollars when we have a trade surplus which would mean we have a balance of dollars after accounting for import spending,” I asked him, after exchanging the usual niceties.
“It’s not as easy as it looks. There are other payments to be made and furthermore, the Central Bank has accused some exporters of keeping their earnings abroad,” he said.
“So does this mean that while the figures might show a trade surplus, some part of that money recorded in the figures may still be abroad and not repatriated?” I asked.
“Partly true,” he said, adding that maybe the Central Bank should explain whether the import component includes the monthly fuel requirement of $500 million to clear any doubts whether there is a trade surplus in real time or whether the trade surplus also includes non-repatriated funds by exporters.
Desiring a second mug of tea, I got one from the kitchen and was immediately drawn to the conversation by the trio under the margosa tree. “Mata ahuna Pitakotuwe thoga welanda-sal wala samba haal kilo ekaka mila deguna wela kiyala rupial 240-kata giya sumane. Giya avurudde mila 128-ta thibune. Mila hari wedyi ne (I am told that in the Pettah wholesale market, the price of Samba rice has doubled to Rs. 240 per kg last week from Rs.128.57 in the same period in 2021. This is very expensive),” said Kussi Amma Sera.
“Bonchi mila ihala gihin-lu rupial 260 idan giya avurudde, rupial 420 ka-ta (Beans have risen to Rs. 420 from Rs. 260 last year),” noted Serapina.
“Me-maase janadipathi-ge aya-wayen duppath minisunta sahanayak thiyewida danne-nae (I wonder whether the President’s budget this month will provide some relief to poor people),” said Mabel Rasthiyadu.
As I walked back to the office room, I was reminded of a ‘hot’ exchange of words between the Central Bank and exporters. Last week the Central Bank warned offenders violating current rules pertaining to foreign exchange transactions, which include exporter and migrant worker remittances, of serious action, as the country desperately tries to overcome a forex crisis. “Any instances of non-compliance will be dealt with stern action within the provisions of all applicable laws,” it said, while not directly accusing exporters.
But two chambers – the Joint Apparel Association Forum (JAAF) and the National Chamber of Exporters (NCE) – challenged the export earnings’ data presented by the authorities. “Our members are acutely conscious of the predicament our country is in and we are confident that companies in our membership have been abiding by the law, ensuring that export proceeds are repatriated back,” the JAAF said.
The NCE said that simply highlighting long years of malpractice by exporters of not remitting forex earnings, is only showcasing the ineffective governance of this highest state authority. “We are surprised to hear that even a year ago as stated by the Central Bank, Sri Lanka Customs had reported $985 million worth of exports during the 8 months from January to August 2021. During July/August that year, exporters repatriated an average of $640 million a month,” it said.
Winding up my column, I was struck by Mabel Rasthiyadu’s plea for some relief in the budget. The reality is that while the queues for fuel might reduce due to the efficiency of the new QR code system, it’s getting tougher for people to survive.
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