Sri Lanka’s President Gotabaya Rajpaksa has issued emergency regulations under Public Security Ordinance and appointed a Major General to oversee food distribution as prices of goods went up and the country’s currency rupee fell in the wake of dysfunctional bond auctions and money printing.  Like the rest of South Asia, Sri Lanka is confronting an economic crisis triggered by Covid-19.

“President Gotabaya Rajapaksa has promulgated emergency regulations under the Public Security Ordnance on the supply of essential goods from midnight today,” his spokesman Kingsley Ratnayake said in a twitter.com message on Tuesday.

The regulations give powers to officials to ensure essential items including, paddy, rice, and sugar are sold at government-mandated prices or prices based on import costs at Customs and prevent hiding of stocks, he said.

It will also allow state banks that had given credit to import goods to recover their loans, he said.

To coordinate the distribution of food, Major General M D S P Nivunhella had been appointed Commissioner General of Inland Revenue, he said.

The regulations came as a 50 billion rupees bond auction failed to draw buyers due to controlled ceiling yields and 92 percent of the offer was unsold.

On Friday 12 billion rupees were printed after last Wednesday’s Treasury bill auction failed to sell all offered bills.

State Minister for Marketing and Consumer Protection Lasantha Algiyawanna said rice and sugar had gone up more than any other commodity and it cannot only be blamed on international prices and the fall of the rupee, ECONOMYNEXT reported.

Sri Lanka has also banned the import of rice, creating further supply shortfalls. But international rice and sugar prices have also risen as the US Federal Reserve printed money and drove commodity prices up.

The minister said by August 13, 2021 authorities have estimated that 221,664.64 metric tons of paddy were stocked in 157 paddy stores, 177,842.97 metric tons of rice 117 rice warehouses.

There were 124,344.67 metric tons of white sugar in 74 storehouses, 33,132.11 metric tons of brown sugar in 52 stores, and 19,896.49 metric tons of maize in 32 maize stores were registered with the Consumer Affairs Authority.

Although there was an uptick of 4.3 percent in the nation’s output of goods and services or GDP in the first quarter of this year, the overall performance during 2021 is expected to be below pre-Covid levels.

However, the problems on the growth and fiscal fronts predate the onset of the pandemic. The pace of expansion entered negative territory by 3.6 percent in 2020 due to Covid -19 but GDP growth slackened much earlier. During 2017-19, for instance, it averaged 3.1 percent, which was well below the average of 8.5 percent during 2010-12.

On the external front, the foreign debt is a massive USD 32.2 billion as of March 2021, with USD 4 billion to be repaid annually at a time when its foreign exchange earnings from export and tourism have dwindled.

The fiscal deterioration and rising external financing risks led agencies like Standard and Poor’s and Fitch to downgrade Sri Lanka’s credit rating in end-2020. For the same reasons, Moody’s, too, has recently placed the nation’s sovereign rating under review. This shuts off the island nation from accessing international capital markets.

Earlier, the government had imposed restrictions on imports of a wide range of commodities, from agricultural chemicals like fertilizers – ostensibly to encourage organic farming – as also cars to the essential spice, turmeric.

(SAM)