ECONOMYNEXT – A Sri Lanka bakery cartel has raised the price of bread by 10 rupees after a wheat flour oligopoly raised prices while a restaurant association said all short-eats will also go up by 5.0 rupees from today as the country reaps the results of record money printing.
“Yesterday the price of a kilogram of wheat flour had gone up by 17.50 rupees a kilogram,” All Ceylon Bakery Association President N K Jayewardene told reporters after calling a press conference.
“That is an unprecedented increase. Usually, prices go up by 8 to 10 rupees. About a month ago wheat flour went up by 10 rupees. So in recent days, wheat flour has gone up by 28 rupees. Other than water all inputs to bakery industry had gone up.”
The All-Island Restaurant Owners Association Asela Sampath said there was a shortage of wheat flour in the market.
A sack of flour will go up by 875 rupees or 17.50 rupees a kilogram.
“Parata, rolls, egg-roti will go up by 5.00 rupees, ” Sampath said. “Kottu-roti will go up by 10 rupees.”
Not having learned a lesson from the shortages seen with price controls on milk and gas, Ranjith Vithanage, the head of the group calling itself the National Movement for Consumer Protection called for more price controls.
Sri Lanka’s vegetable prices which shot up amid heavy rains have started to come down. In Sri Lanka vegetable prices generally go up in November and December.
Sri Lanka’s official inflation index moved up above 8.0 per cent in October, the highest since 2017, after two years of money printing which began around September 2014.
Sri Lanka has been printing record volumes of money over two years claiming that it does not cause inflation.
Supporters of money printing pointed to wrong policies of reserve currency central banks like the Fed and the European Central Bank to justify the printing by a pegged exchange rate note-issue bank.
But reserve currency central banks have now fired aggregated demand bubble which is firing inflation all over the world and Sri Lanka money printing has led to a currency collapse which is amplifying the effect through exported and imported products.
Sri Lanka reserve money has gone up by 38 per cent from December 2019 (932 billion rupees) to September 2021 (1,296 billion rupees).
Sri Lanka has printed 934 billion rupees from December 2019 to September 2021 driving up reserve money by 30 percent to 1,296 billion rupees from 932 billion rupees.
The rest of the printed money had created a balance of payments deficit, as they were exchanged for foreign reserves to maintain an exchange rate peg. Due to partial convertibility, the rupee had fallen to 203 from 182 to the US dollar and forex shortages persist.
Forex shortages from money printing have also reduced some imports which are also pushing up prices.
Prices of vehicles have also moved up. Even without import controls, used car prices have moved up in the US after money printing. (Colombo/Nov28/2021)