State Minister of Finance quashes incorrect foreign media reports | Daily News

State Minister of Finance quashes incorrect foreign media reports

‘Govt will protect consumers from food hoarders’
State Minister Lasantha Alagiyawanna inspects food stocks at a shop in Pettah last Friday (3).
State Minister Lasantha Alagiyawanna inspects food stocks at a shop in Pettah last Friday (3).

Several foreign news agencies and outlets including Al Jazeera reported on August 31 that Sri Lanka has declared a “food emergency” as it is facing a severe food shortage. The basis for this misinterpretation of facts was the appointment of a Commissioner General of Essential Services under the Public Security Ordinance for the distribution of essential foods and other commodities.

Here, State Minister of Finance Ajith Nivard Cabraal breaks down these reports, with clear answers for the allegations raised in the reports. 

Headline: Sri Lanka declares food emergency as Forex crisis worsens

Answer: Sri Lanka has declared a State of Emergency over food in order to protect the consumer from unscrupulous traders who were creating artificial shortages of food. The country has sufficient stocks of food for the foreseeable future and beyond. We have ample food stocks in this country for all needs. We are also taking necessary steps to ensure that food shall not face any shortage in the future. However, we did notice in certain instances, a few unscrupulous traders, with the intention of making a fast buck, had been trying to hoard stocks in a secretive manner and use it when they could command them at higher prices. That situation had to be dealt with very quickly and that is what the government has done. Any responsible Government would have done that. In order to do so in a framework of legality, we have invoked certain laws and the Government has the authority to do so.

Foreign Media Report:

With the country suffering a hard-hitting economic crisis, President Gotabaya Rajapaksa on Tuesday said he has ordered Emergency Regulations to counter the hoarding of sugar, rice and other essential foods.

Answer: Invoking Emergency Regulations to counter hoarding is true, but saying there is no money to finance imports is not true. Imports have increased by over 10 percent year-on-year (YOY) this year and in the case of certain food items (particularly sugar) there has been highly excessive imports whereby inventories have been accumulated which are sufficient for over a year, on the speculation that the Sri Lanka Rupee would depreciate and a massive profit could be made. After building up such stocks, certain unscrupulous traders have created an artificial shortage so that they could fleece consumers and profit. By these regulations, the Government has dealt with the situation.

Foreign Media Report: The Regulations give wide powers to officials to seize food stocks held by traders, arrest people who hoard essential food and for the government to fix controlled prices. President Rajapaksa has named a top Army officer (Major General M.D.S.P. Niwunhella) as the Commissioner General of Essential Services to coordinate the supply of paddy, rice, sugar and other consumer goods.

Answer: These are existing Regulations which had been framed in the past for the Government to deal with such situations.

Foreign Media Report: The move followed sharp price rises for sugar, rice, onions and potatoes, while long queues have formed outside stores because of shortages of milk powder, kerosene oil and cooking gas despite the country being under a 16-day curfew, until next Monday (13) due to the increase in COVID-19 cases.

Answer: Queues have formed outside all stores at present because of ‘social distancing’ (stores cannot accommodate everyone at once) and to suggest otherwise is downright mischievous.

Foreign Media Report: Trade Minister Bandula Gunawardena said some traders were hoarding stocks, resulting in shortages of certain food items and causing an inconvenience to the public.

Answer: True, and any right thinking person will acknowledge that the Government must respond to such a situation and deal with it.

Foreign Media Report: The Government has increased penalties for food hoarding but the shortages come as the country of 22 million battles a fierce Coronavirus wave that is claiming more than 200 lives a day.

Answer: Again, this is a half-truth as the temporary shortages were caused by illegal actions of some traders, and that is now being dealt with. There are now penalties up to Rs.100,000 (up from just Rs.2,500) for hoarding essential foods and other supplies.

Foreign Media Report: The economy shrank by a record 3.6 percent in 2020 because of the pandemic and in March last year, the Government banned imports of vehicles and other items, including edible oils and turmeric, an essential spice in local cooking, in a bid to save foreign exchange.

Answer: It is true that the economy recorded a negative growth of 3.6 per cent last year, but the article does not say that the economy will grow by an estimated 4.5 percent this year. Imports of turmeric and certain other spices were discontinued as the local farmers were able to grow all required quantities, and as of today, there is no shortage of any spice items in the market.

Foreign Media Report: Importers still say they have been unable to source US Dollars to pay for the food and medicines they are allowed to buy.

Answer: Certain importers have imported stocks of certain items far in excess of the required quantities due to speculation, and in some such instances, there have been delays encountered, as exporters too, have been slow to convert their Forex on the speculation that they will be able to get a better rate for their Forex, if they delay conversion. Interestingly, since the Covid pandemic struck, exporters have built up Forex balances by over US$ 2 billion, in the hope that they could gain by a speculated future depreciation of the Sri Lanka Rupee. 

Foreign Media Report: Sri Lanka’s foreign reserves fell to US$ 2.8 bn at the end of July, from US$ 7.5 bn in November 2019 when the Government took office and the Rupee has lost more than 20 percent of its value against the US Dollar in that time, according to Central Bank data.

Answer: Forex reserves dropped in July due to the settlement of US$ 2 billion of International Sovereign Bonds within one year, but since then, reserves have increased to US$ 3.8 bn by end August. Sri Lanka can also access a SWAP of US$ 1.5 bn from the People’s Bank of China, which means the available reserves are around US$ 5.3 bn. With the expected inflows, there is no risk of settling all due payments. In fact, it is really stories that are circulating in the local and international media (some possibly deliberate) which are fuelling speculation. Increasing the policy interest rates was a Central Bank action which dealt with the anomaly where the local currency interest rates were less than the Forex interest rates, a situation that needed to be addressed with a suitable policy action. 

Foreign Media Report: Energy Minister Udaya Gammanpila has appealed to motorists to use fuel sparingly so that the country can use its foreign exchange to buy essential medicines and vaccines.

Answer: In times of rising oil prices, it is a fair request. Attributing a motive to that request which suggests desperation, is perhaps confirmation of the deliberate attempt to cause a destabilization of the economy.

Foreign Media Report: A Presidential aide has warned that fuel rationing may be introduced by the end of the year unless consumption is reduced drastically.

Answer: Again, this is a speculative comment attributed to an unknown party, perhaps with the intention of buttressing their storyline.

Foreign Media Report: Meanwhile, there has been a rapid increase in COVID-19 deaths in Sri Lanka in the past few weeks, with more than 200 deaths a day and more than 4,500 daily cases reported for the past 10 days. Sri Lanka has recorded 8,991 COVID-related deaths since the start of the pandemic, according to official figures.

Answer: While this is true, for the sake of accuracy and completeness, the article could have also stated that Sri Lanka is currently implementing one of the best vaccination programmes in the world, with 99 percent of persons over 30 having been administered the first dose, and over 65 percent of such persons given the second dose as well. By mid-September, 99 percent of all persons over 30 years would have been vaccinated. The situation will improve significantly after mid-September and now we are vaccinating the 18–30 age group as well.

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