ECONOMYNEXT – Eskaline Vijitha Fernando (43) has been eagerly awaiting Christmas this year. Her second child, two-year-old Wonvril Donella, is to celebrate her first Christmas this Saturday (25) after the Easter Sunday attack in 2019 and the COVID-19 pandemic forced her family to forego celebrations.
Vijitha’s 15-year old son Wayne Donovan Fernando, who needs special care, has also been eagerly waiting for this year’s festivities.
But the mother of two, who lives at her father-in-law’s just 250 meters from St Anthony’s Church in Kochchikade that was a target of Islamist militants in April 2019, is forced to let this Christmas go as well due to the rising cost of living.
Her four walls painted a cheerful orange do not reflect the mood within.
“The last time we properly celebrated Christmas was in 2018. In 2019 we had the bombs, in 2020 there was COVID-19, and this year we can’t even imagine festivities,” Vijitha told EconomyNext.
Skyrocketing prices of food and other goods have adversely impacted Fernando and thousands of other Catholics and Christians – and indeed Sri Lankans of various faiths – who are looking to celebrate the birth of Christ this year.
‘’We haven’t made anything for this Christmas. We have family who are struggling and when we think about them, we don’t feel like celebrating,” said Fernando.
“It’ll easily come to 10,000 rupees for Christmas cake and sweets, and we don’t want to spend money like that. We try to save it for something else. We didn’t even go shopping for the little ones.”
Sri Lanka has seen the worst ever price escalations in essential goods amid shortages in key commodities in the market.
Prices of vegetable have more than doubled in the last two months, while the price of rice has surged over 50 percent in the last six months. Fish and chicken prices have increased over 80 and 60 percent respectively, while milk has gone up by over 30 percent. Meanwhile, cooking gas prices have also shot up by a staggering 80 percent in the midst of an explosive scandal over an alleged change to the gas composition.
The government this week raised fuel prices this week by over 12 percent.
Vijitha has opted not have the usual family gathering for Christmas this year and also forego a planned visit to an elders’ home and an orphanage to distribute Christmas cake. Times are so hard, she said, she is also uncertain about decorating the house or exchanging gifts with her own family members.
Sri Lanka’s rocketing prices are due to money printing and flawed monetary regime, where large volumes of money has been printed, with inflationary policy being followed from around August 2019 and racheted up to full blown ‘modern monetary theory’ from around February 2020.
Broken Mandate
The central bank has failed to produce low inflating money, according to its legal mandate of keeping “economic and price stability”.
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Excess money printing, higher import price of commodities, and supply shortages due to heavy rains in cultivation areas and lack of agro-chemical all contributed to the ongoing high prices, analysts say.
The island nation‘s inflation based on the National Consumer Price Index (NCPI) hit a record high and touched double digits for the first time in November even before the fuel prices were kept down, suppressing the index.
In the year to October 2021 alone, Sri Lanka’s reserve money supply has grown 38 percent to 1,286 billion rupees, with hardly any increase in output of goods and services (economic growth) as money was printed in a state intervention called ‘stimulus’ to keep interest rates down.
In the two years to October 2021 reserve money supply went up 41 percent from 908 billion rupees. Broad money went up 41 percent to 6,743 billion rupees.
In the nine months to October 2021, real gross domestic product (output of goods and services) was estimated at 7,062 trillion rupees, lower than the 7,152.1 billion rupees in the first nine months of 2019, two years ago when money in circulation was sharply lower.
Since inflationary policy began around August 2019 food prices are up over 35 percent up to November, data shows. (Sri Lanka national inflation hits 11.1-pct in November 2021 after money printing)
Most money is printed to pay salaries of state workers, who buy goods and services before others.
Domestic production of agricultural goods have also been disrupted due to a state intervention in the supply of fertilizer (now reversed) and agriculture chemicals on top of money printing.
But due to import controls, another state intervention mde as money printing created foreign exchange shortages, foreign goods cannot supply the lost production, tightening supplies.
Prices of controlled items like rice is in Sri Lanka is higher than world prices. The government has said it will import some rice from Burma at a lower price.
Items like milk powder, which are not controlled, are not available even at higher world prices. Global commodities have also gone up due to money printing by the US Federal Reserve.
Some importers are also pricing goods higher with parts of the import bill being settle at rates higher than the official rate, due to shortages in the formal system.
“There’s no food even if you have the money. No milk, no gas; how do you celebrate a festival?” Vijitha’s father-in-law Enaliyans Fernando told EconomyNext.
Reduced purchasing power
Vijitha’s husband Martys Littone Fernando who is working as an assistant manager in a tourism firm is fortunate to have retained the same monthly salary in a pandemic-hit hospitality industry. However, with the price hikes, his purchasing power has reduced sharply as a result of skyrocketing commodity prices.
Increasing commodity price have prevailed globally due to increased freight and transport charges during the pandemic, but Sri Lanka is suffering due to its own past sins.
“The prices went up so suddenly. How are we expected to manage? But we have to eat something. The foods we usually cook twice a week we now only make once a week,” said Vijitha.
“Bread prices have gone up. Kerosene has gone up. When you eat, you have to eat happily. It’s not possible to eat happily when everything is going up in price like this. What about the many who are poorer than we are? How are they managing on so little?”
“Bomb in the house”
Adding to Vijitha’s woes, fires and explosions related to Liquid Petroleum (LP) Gas has also made her reconsider her Christmas plans.
Over 800 fires and explosions have been reported since October, killing at least one, while no authority has taken responsibility.
Despite a presidential probe, gas cylinder related explosions still continue and authorities have yet to come up with a suitable solution.
The latest situation is described by some government critics on social media as “bombs going off inside the house.”
“This is a very dangerous situation. We have no idea when the cylinder might blow up,” said Vijitha’s husband.
“For a while it looked like we would have a shortage of rice, but that turned out to be okay, but now the problem is with milk and gas,” he added, commenting on the ongoing shortages.
“On the rare occasion that gas is available, we’re too afraid to buy it in case it explodes. We’re afraid of kerosene stoves too. It’s not like kerosene is easily available anyway.”
Authorities have requested customers to keep their gas cylinders outside their houses to ensure any leakages do not result in explosions.
However, Fernando says it is impossible to adhere to the government’s request because they do not have the luxury of open space around the kitchen due to congestion in Kochchikade.
“Most people can’t keep the stoves or cylinders outside. We have to do everything inside. Nor can we have a kerosene stove on when children are around.”
The presidential committee that probed the gas explosions said a change in the composition of LP gas was the main reason for the explosions, directly contradicting claims by other government officials that it was substandard stoves, regulators, hoses and other accessories.
Related: Sri Lanka presidential probe on gas explosions contradicts previous official claims
The delay in a conclusive assessment of the main reason for the explosions has resulted in a delay in gas cylinder supply to the market, depriving customers the convenience of cooking gas and forcing thousands to resort to kerosene cookers or firewood stoves.
Strict health guidelines due to fear of the Omicron variant of COVID-19 spreading in the country have also restricted Christians’ usual shopping sprees this year.
The many woes and difficulties faced by Sri Lankans in what should’ve been a time of joy were reflected in the government’s Christmas message this year, which was somewhat lacking in merriness.
“We hope that our Christian brethren can celebrate Christmas in a spiritual manner this year,” Government Spokesman Dallas Alahapperuma told weekly cabinet media brief on Tuesday. (Colombo/Dec23/2021)