ECONOMYNEXT – Sri Lanka’s poorer households have cut meat from their diets and are also taking lower doses of drugs, researchers said as the rupee collapsed in the worst currency crisis in the history of the island’s intermediate regime central bank.
With the rupee collapsing from 200 to 360 to the US dollar in 2022 after two years of money printing, food prices have risen 90 percent in the 12 months to August as all other goods and services also rose 70 percent, reducing the standard of living and the value of salaries and savings.
A survey by the Sri Lanka Red Cross Society and the International Federal of Red Cross and Red Crescent Societies has shown that 50 percent of the households have reduced the intake of meat and fish while 11 percent have completely dropped the proteins from their diet.
The ‘Sri Lanka Complex Emergency Needs Assessment Report’, of the Red Cross covered 2,871 households in 11 districts, and 300 estate sector households and also involved focused group discussions.
Around 58 percent of the households claimed their health conditions had worsened since January 2022, and 30 percent have faced difficulties in obtaining health facilities in the last three months, Sinha Wickremesekara, a doctor who is a member of the research group said.
“We were able to find that, in all three sectors of the survey, the medicine prices are high and the transport cost is high,” Wickremesekara said. “Most of the time they spend a higher cost in transport but they don’t get all the medicine from the hospitals,”
“If they get a prescription to buy medicine from a pharmacy, rather than going for the mentioned high-price brands they go for the lower-price brands. They said they have also reduced the dosage of intakes of medicines per day in order to afford the medicine.”
More than 50 percent of the households said the debt situation is worse than earlier this year and families in estates, and in agriculture and fishing communities are the worst affected.
The survey recommended provision of food assistance including through school kitchens and food banks while building community resilience by supporting food production.
In the health area, scaling up dengue prevention activities, community-based health and first aid production and provision of menstrual hygiene products. Mental health support and psychological social support were also needed.
Sri Lanka runs into frequent currency crises due to the mistargeting of interest rates by the central bank with printed money while operating a reserve collecting peg and imposing exchange controls, generally known as the impossible trinity of monetary policy objectives.
In addition to steep currency crises which drove Sri Lanka to the International Monetary Fund 17 times since the soft-peg was set up in 1951, Sri Lanka’s economists also deliberately depreciate the currency to reduce the real salaries of workers and give extra profits to exporters.
Attempts to control the ability of the central bank to print money via its policy rate and hard peg (float the interest rate) have so far failed with strong resistance from macro-economists who want to depreciate the currency.
With a desire to collect reserves and run them down a floating exchange rate is also not operated. Currency crises are not possible in a clean float, which isolates reserve money from the balance of payments. (Colombo/Oct18/2022)