Explained: Why has Sri Lanka declared a food emergency?

A national emergency declared by President of Sri Lanka Gotabaya Rajapaksa was approved on Monday by the Parliament. The government claimed it was needed to examine ever-increasing food prices and hoarding of essentials by a “food mafia”. However, the opposition said it was “in bad faith, with the ulterior motive of further restricting fundamental rights of the citizenry and moving further in the direction of authoritarianism”.

So what exactly brought upon this major food emergency in Sri Lanka? 

Was it inflation, debt, forex crisis?

Due to dangerously low foreign exchange reserves, Sri Lanka has been failing to repay foreign loans, resulting in a massive foreign debt burden. 

Even before the pandemic hit the world and crashed the tourism industry, Sri Lanka’s had already been ravaged in 2019 Easter attacks. The tea and garment industries have also not been doing well, affecting exports.

Although 2020 saw an increase in remittances it wasn’t enough to pull the country out of the crisis. While the $ 400 million currency swap with India remains to be materialised, the country managed to seal a $1.5 billion currency swap deal from China. Furthermore, Bangladesh jumped on the bandwagon and offered the first tranche of $ 50 million of a $250 million loan swap agreement.

A currency swap is a loan agreement for repayment with interest in the local currency.

Additionally, Sri Lanka hasn’t been able to import as much as it used to, due to low forex reserves. 

It halted the imports of vehicles and several other items, including edible oils, turmeric, and even toothbrushes, earlier this year. Sri Lanka imports most of it essential food items, including pulses, cooking oil, wheat flour and sugar. 

Well, this accounted for only the supply side problem of the crisis.

On the demand side, the printing of Rs 800 billion by the Central Bank of Sri Lanka over the last 18 months ended up increasing liquidity in the economy. The infusion of money has led to inflation, as the consequent increase in demand failed to match the supply. 

As a result, the currency is devalued, imports are costlier, debt has increased and there’s more pressure on the forex reserves. 

The emergency has been declared under the legal framework of the Public Security Ordinance (PSO).

“With the declaration of a State of Emergency on 30th August 2021, the President is now able to promulgate Emergency Regulations dealing with any subject at any given time. Considering Sri Lanka’s history with emergency, other security related laws and legacy of repression, this raises serious concerns,” the Colombo-based think tank Centre for Policy Alternatives noted in a statement.

“The importance of ensuring that the extraordinary powers arrogated to the executive through these emergency regulations have to be used purely for the specific purposes recognised by the regulations…must be recognised as a temporary conferral of extraordinary power for the government during times of acute crisis. It should not be considered as a substitute for the ‘normal legal regime’. As such the State of Emergency should be in force only for a limited period of time,” the Centre for Policy Alternatives note said.

It urged citizens to challenge “any measure to stifle dissent, curtail civil liberties and threaten Sri Lanka’s constitutional democracy”.