Ground report: Economic crisis eases but inflation still bites Sri Lankans

Malith Asanga watched on as his wife told an egg seller that he had given them less change. “She studied accountancy,” he said proudly, as the vendor admitted his mistake and returned the correct balance. “Every rupee counts,” said Asanga. It is a comment one hears widely across Sri Lanka.

The couple was in a market in the Colombo suburb of Ratmalana. It was their weekly visit to buy provisions to last their family through the next seven days. They are a family of four, but will soon be five as his wife is pregnant with a third child.

With two boys aged six and four and a baby on the way, the cost of living is something Malith constantly worries about. He pointed to the bag containing the provisions they purchased. It included 5 kg of rice, a few coconuts, a bottle of coconut oil and eggs. “We’ve spent nearly 8,000 (Sri Lankan) rupees (LKR) and we haven’t even bought any vegetables yet.”

Soaring cost of living

Malith, an autorickshaw driver, remembered the time before the pandemic when they could get by with about LKR 3,000 a week. Things have gotten steadily more expensive. “Now a family such as ours needs about LKR 10,000 a week to live decently. By that, I mean we can have three meals a day with about two curries,” he said.

While the situation is far better than what it was at the height of Sri Lanka’s crippling economic crisis, it is still a daily struggle for the survival for tens of thousands of people like Malith. He is unsure if the 2025 budget Sri Lankan President Anura Kumara Dissanayake presented days earlier will help much.

“It would be good if it helps the cost of living go down,” Malith said.

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Automobile prices bite

Restaurant owner BAS Fernando (48) had been hoping that vehicle prices would fall with the government lifting a ban on vehicle imports. However, with excise duties on most imported vehicles between 200 and 300 per cent, those hopes have been dashed. Even second-hand vehicles are too expensive.

As the owner of a small restaurant, he lamented that expenses were too high. “Many other restaurants sell meals at higher prices but I can’t put the entire burden on customers. So, my meals are comparatively cheaper. I am lucky that I have a lot of loyal customers but my profit margin is low,” he said.

People have little to spare

Sepala Jayalath (52) has been selling coconuts for nearly 30 years. He said business has been hit especially hard owing to a coconut shortage that has seen prices skyrocket. Different sizes of coconuts fetch varying prices. The largest Jayalath has are sold at LKR 210 each. He pointed out that many buy small ones.

As he spoke, a woman came up and selected two of the smallest coconuts prized at LKR 150 each. “See,” he said, as she walked away. “People just can’t afford to buy.”

At his cosmetics shop, MSM Fowzer (48) complained that business is slow. “Many people are struggling to put food on the table, so how can they spend on cosmetics?” he observed. Prices of both imported and locally made cosmetics are high. “We were hoping the government would grant more relief but that hasn’t happened,” he rued.

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Word of optimism

The high price of spare parts for his three-wheeler is a major concern for NGS Karunasiri (73). “Thank God I have a three-wheeler. One costs at least LKR 2 million now. How can anyone afford one at that price,” he remarked.

Having voted for President Dissanayake and the National People’s Power (NPP), Karunasiri remains optimistic that things will get better. “Rather than criticize all the time, we should give them some time to deliver on their promises,” he said.

It is now five months since Dissanayake was elected the president and three months since his NPP won an unprecedented two-third majority in Sri Lanka’s parliament.

Angry voters

Dissanayake and his NPP came to power on the votes of a populace unhappy over the economic burdens many felt were being unfairly heaped on them under painful economic reforms introduced as part of a bailout package signed with the International Monetary Fund (IMF).

Many voters were also fed up with rampant corruption. The new government finds itself burdened with the challenge of meeting the vast expectations of the electorate.

The NPP has conceded it cannot renegotiate the agreement with the IMF, and whatever relief it provides will have to be within the parameters of the pact.

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Relief measures

Dissanayake alluded to this when presenting his government’s inaugural budget in February. He said it had been prepared with a focused sense of fiscal discipline, economic vision and guidance.

Some relief measures have been provided. The tax-free income threshold has been raised, electricity tariffs have been reduced, and fuel and cooking gas prices remain steady. The government has also increased the social protection net while public servants have got a substantial salary increase.

Yet, the challenge before the government to deliver on its promises remains enormous.

Farmers’ issues

Farmers made up a sizeable voting bloc for the NPP. Hit hard by the economic crisis and the disastrous farm policies of the Gotabaya Rajapaksa government, a large number of farmers now face severe difficulties owing to torrential rains that have devastated crops. Heavy flooding damaged crops in November and early this year.

“The weather patterns have changed considerably owing to climate change. They have become totally unpredictable,” said a young farmer from Kilinochchi, a former Tamil Tigers stronghold some 350 km north of Colombo.

The farmer, who refused to be named, pointed out that it rained heavily during the Tamil harvest festival of Thai Pongal on January 14. It forced the opening of 12 sluice gates in the Iranamadu tank, which provides water to farmlands in this area. “The floods destroyed much of our crops. So, the paddy harvest was quite low this season,” said one.

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Compensation for farm losses

The government has compensated the farmers whose crops were damaged by the floods. By March 11, around LKR 952 million had been paid out as compensation to 53, 511 farmers for 61,071 acres of cultivated land that suffered damage, according to the Agriculture and Agrarian Insurance Board.

There are worries over a severe drought from April to June during the upcoming cultivation season.

The Kilinochchi farmer blamed successive governments for not having invested in modern technology for agrarian and agriculture sectors, resulting in farmers being unprepared to deal with changing weather patterns.

Farmers and debt

Plagued by poverty, most farmers have become trapped in a cycle of debt, he lamented. “The production cost is high, forcing farmers to borrow more. They can only recover if their harvest succeeds next season. If not, they’ll have to borrow again to pay back the earlier debt. This results in a vicious debt cycle.”

Given such levels of uncertainty, many of the younger generation have opted to give up farming and migrate to cities and towns in search of other work, he revealed.

“Sometimes I too wonder if all this is worth it. There’s no profit in agriculture.”

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Fingers crossed

The government has allocated LKR 209 billion for the ministry of agriculture, livestock, lands and irrigation in this year’s budget, with a focus on modernizing the agriculture sector.

The farmer said he was happy to see a significant increase compared to the previous government’s budgetary allocation for agriculture. “But I’m not sure if all their policies will be implemented,” he says.