SRILANKA'S NATIONAL FOOD EMERGENCY

1. Context

• Sri Lanka's Parliament recently approved a national emergency declared by President Gotabaya Rajapaksa to address soaring food prices and hoarding by a "food mafia."
• However, the Opposition views the emergency as a pretext to curtail fundamental rights and move towards authoritarianism.
• This emergency comes amid a severe food crisis, exacerbated by debt, forex shortages, and inflation.
• The combination of economic challenges has put immense pressure on the country's foreign exchange reserves and severely impacted imports, including essential food items. 

2. The Forex and Debt Crisis

• Sri Lanka faces a substantial foreign debt burden, struggling to repay loans due to critically low foreign exchange reserves.
• The loss of revenue from the tourism industry, exacerbated by the 2019 Easter attacks and the pandemic, has further strained the country's forex situation.
• The tea and garment industries have also been adversely affected, impacting exports and adding to the forex crisis.

3. Inadequate Forex Reserves and Import Limitations

• Despite an increase in remittances in 2020, Sri Lanka's forex reserves remain insufficient to meet foreign debt obligations.
• The delay in receiving a currency swap from India, the previous swap with China, and a loan swap agreement with Bangladesh have further compounded the issue.
• Low forex reserves have forced the country to restrict imports, affecting essential food items such as pulses, sugar, wheat flour, vegetables, and cooking oil.

4. Demand-Side Inflation

• The Central Bank of Sri Lanka's printing of Rs 800 billion to alleviate the economic crisis has led to increased liquidity.
• However, the surge in demand without corresponding supply has resulted in sharp inflation, devaluation of the currency, and higher import costs.
• Inflationary pressures have exacerbated the country's debt burden and strained forex reserves.

5. Emergency Measures and Supply Constraints

• Under the declared emergency, the government imposed price controls on essential items.
• However, this has deterred traders from importing goods at high international prices without assurance of profitability in domestic markets.
• Moreover, a restrictive import licensing regime has further hampered the supply of essential commodities.

6. Emergency Declaration and Concerns

• The emergency was declared under the Public Security Ordinance (PSO), granting the President wide-ranging powers.
• While the emergency must be renewed every three months in Parliament, the President can implement regulations without parliamentary oversight.
• Concerns have been raised about the potential abuse of emergency powers, given Sri Lanka's history with emergency laws and security-related measures.

7. Impact on Democracy and Civil Liberties

• Civil society organizations have urged citizens to challenge any measures that stifle dissent and curtail civil liberties, protecting Sri Lanka's constitutional democracy.
• The appointment of a serving major general as the Commissioner General of Essential Services has raised concerns about civilian administration bypass.

8. Memories of Past Food Crisis

• Sri Lanka's current food crisis evokes memories of the 1970s when the country experimented with socialism.
• Long queues outside government-owned Sathosa grocery shops remind people of the "ship-to-mouth economy," ration cards, foreign exchange controls, and scarcity of essential items.
• The recent ban on chemical fertilizers may further exacerbate the situation, affecting agricultural yields and food production.

9. The Way Forward

• Sri Lanka's food crisis is a complex interplay of economic challenges, forex shortages, inflation, and supply constraints.
• The emergency declaration has raised concerns about the potential erosion of democratic principles and civil liberties.
• Addressing the crisis requires a comprehensive approach, including sustainable economic policies, targeted measures to boost forex reserves, and strategic support for agriculture and food production.
• As the country navigates these difficult times, ensuring transparency, accountability, and democratic governance remains crucial to overcoming the challenges and achieving food security for its citizens.