ECONOMYNEXT – Sri Lanka’s Bakery Owners Association which was raising prices by press conference at the height of the island’s money printing crisis, said it will not raise bread prices after a 66 percent rise in electricity prices.
No Cost Push Inflation?
“There is no point of increasing it further, ” Bakery Association Chief, N K Jayawardena told EconomyNext.
“We did it several times and we do not think we can increase it more; we hope to discuss this with the authorities.”
Previous price rises had led to customers buying less, he said.
“The current prices are too high and if we more it will result in further downfall of the business.”
Sri Lanka’s central bank hiked rates in from April 2023, ran out of dollars to engage in sterilized interventions around July and has since avoided money printing and kept a policy which was not against a 360 to the US dollar guidance peg.
Global wheat, maize and freight rates shot up after Fed fired a commodity bubble, but the following rates hikes and liquidity withdrawals (‘un-printing’ dollars or quantity tightening) food and energy prices have eased.
Sri Lanka’s economists in the process of flexible inflation targeting collapsed the rupee from 131 to 182 to the US dollar. They then collapsed it to 360 to the US dollar by printing money for ‘stimulus’.
The Ceylon Electricity Board kept prices unchanged from 2014 to 2021, running some losses, largely with the its coal power plants.
The All Island Canteen Owners Association said a packet of price will be raised by 10 percent after the 66 percent electricity hike flowing the most recent collapse of the rupee.
“From yesterday onwards we increased the prices, prices of Kottu, Fried rice and rice and curry were increased by 10 percent ” association president, Asela Sampth said.
“We have already been hit by many issues, our businesses have dropped and we know with this it will further go down,
“We asked to give us solar (power) but so far nothing has been implemented.”
The association was higher costs from rupee depreciation, followed by the fuel and gas shortages, he said.
The All Island Poultry Association which has not pricing power and has no history of cartelized price hikes unlike bakers and canteen owners said, the effect of the electricity tariff hike is still being assessed.
“In the poultry industry, production cost of mainly broiler, processing chicken will increase,” Ajith Gunasekera Chairman of the All Island Poultry Association said.
“The frozen chicken market, which use freezers will get highly affected.
“However, I do not think it will have any major impact on the egg production or the live chicken markets.”
Sri Lanka’s government slapped price controls on eggs, where prices are determined by demand, and crippled the sector, leading to severe shortages of eggs, as owners killed layer chicken for meat and avoided growing fresh flocks.
(Colombo/ Feb 17/2023)