ECONOMYNEXT- Sri Lanka has decided to buy 100,000 metric tonnes of foreign rice to lower soaring domestic prices Cabinet-spokesman Keheliya Rambukwelle said as trade controls strengthened a domestic oligopoly involved in collecting and milling rice.
“This is not something we are going to do with much willingness but we thought to import 100,000 MT of Samba rice as a tool or a method to ease the pressure on the people,” Minister Rambukwelle told reporters in Colombo.
Sri Lanka was looking at way to bring down rice through a ‘government-to-government’ deal, he said.
“It was decided to bring in rice as some sort of buffer stock,” he explained. “An extra amount should be acquired. Especially due to the current conditions, there are higher prices for rice in the market.”
Global rice prices have also gone up as part of an overall commodity bubble fired by the US Federal Reserve which is printing 140 billion US dollar a month as ‘stimulus’ firing US inflation to a levels not seen since the 2008 bubble.
Sri Lanka has controlled a series of imports from 2020 after money printing created forex shortages.
Last Friday the central bank printed 22 billion rupees, which could potentially create a 110 million US dollar forex shortage through the credit system.
Minister Rambukwelle said rice was being imported despite forex shortages as it was an ‘essential item.’
But domestic rice has long been protected with high import duties, making farming inefficient despite fertilizer subsidies and keeping rice prices above world market level to buy farming lobby votes, boost profits of the collector and milling oligopoly that have political lobby power and also to satisfy an autarkist ideology.
The collector oligopoly has built good storage facilities, compared to state agencies where buffer stocks rots attracting weevils and black soldier fly larvae according to pictures published by Sri Lanka’s Auditor General.
Co-Cabinet spokesman Minister Ramesh Pathirana said that according to the government calculations, the paddy harvest has been good this year.
“But because of the rice mafia that operates in Sri Lanka among three or four people by collecting stocks of rice, we decided to import rice as security stock to control the prices in the market,” he claimed.
Frequent forex shortages from money printing has also driven the country towards peculiar policies to ‘save foreign exchange’ instead of placing restraints on the open market operations of the central bank.
There are several import substitution ‘mafias’ involved in maize and a series of building materials which is putting food and houses out of reach of the less affluent.
Sri Lanka’s non-traded odorous rice also cannot compete with aromatic grains of free trading East Asian countries such as Thailand and Vietnam. Sri Lanka rice also lags behind the palate and price of Pakistan and Indian produced traded rice.
Vietnamese rice grades for example has made quantum leaps in recent years is commanding high prices in the world market after in abandoned self-sufficiency under doi moi in 1984 and reformed the central bank in 1989.
This year Vietnam imported Indian rice for the first time to be used as animal feed, because rising quality made domestic grades including broken rice become highly sought after in the market.
In Sri Lanka there had been warning that rice harvests will fall after the government suddenly banned fertilizer use from the next season to improve on health grounds and to save 400 million US dollars in foreign exchange.
Anurduddha Padeniya, the head of the Government Medical Officer’s Association has said fertilizer has to be banned since agro-chemicals were killing more people than Coronavirus.
However Minister Rambukwelle said the current decision to import rice was not linked to the fertilizer shortage seen during this season.
“So one way to control the prices is to create competition in the market,” he said.
“So in order to do that, we are importing 100,000 MT and expect to present it to the market especially thinking about the consumers and not because of a shortage in fertilizers.”
He said any fallout from fertilizer would be seen in the next season. .(Colombo/June22/2021)