ECONOMYNEXT – A collective of bakery owners in Sri Lanka has warned of possible bread shortages after wheat importers informed them of supply disruptions as money printed to keep interest rates low triggered forex shortages.
President of the All Ceylon Bakery Owners Association N K Jayawardena told reporters on Friday (07) that in discussions held with flour importers, the association was informed that the situation was dire.
“The companies said they can give us as much flour as we want, but the issue is with dollars. They told us that they only get 10 percent of the dollars they need. So what are they going to do?” Jayawardena asked.
Sri Lankans have been lining the streets in recent days looking to purchase cooking gas and milk powder amid supply disruptions and high prices as money injected to interbank market to keep interest rates triggered excess credit and forex shortages.
“People might not be able to buy bread even if they stand in queues,” said Jayawardena.
Sri Lanka was printing money for over two years to keep interest rates low and was monetizing the deficit by failing bond auctions through price controls.
However bond auctions are now mostly working, but liquidity is injected to sterilized interventions and also through dollar surrenders on a 200 to the US dollar peg which is severely on its weak side as to create parallel exchange rates, analysts have said. (Colombo/Jan07/2022)