The Economic Crisis of Sri Lanka - 2022

Sri Lanka is facing one of the worst economic crises in the world today. 

Fuel is in short supply, and prices have gone up, hence transport is stuck. 

Foreign reserves are near zero. The US dollar has gone up against the local currency. Hence imports are next to impossible. 

Food prices are up. We import most of the materials such as wheat flour, milk powder, dairy products, and the list goes on. Hence, food is expensive, and supply is low. 

Fertilizer is not in the market; hence the agriculture sector is frozen. Again, we import almost all of our fertilizer. 

Due to transport costs and lack of fuel, all meat items, fish and even eggs are in short supply and their prices have skyrocketed, by almost 100% increase in price. 

Gas, LPG, used for cooking is very scarce. So, the food shops are closing down. 

It is just a glimpse of what can be seen. 

Due to lack of business, the small and medium scale businesses are cutting down staff and sometimes cutting down pay. Some sectors are crippled, such as small food shops, bakeries and those who sell bakery products, local tuk-tuk service providers, etc. is losing their livelihood. 

While the economic indicators will show the scale of the problem, the ground realities are good and more pragmatic indicators of the gravity of the hardships. 

Some of the three-wheel parks used to have 10 to 20 tuk-tuks all the time, and they used to get constant business every few minutes. Now the parks are down to 2 to 4 tuk-tuks. Almost 80% reduction. The demand for rides has drastically reduced due to high pricing driven by fuel prices. There used to be many tuk-tuks who used to roam the roads until they find a ride. Given the unaffordable fuel prices, they have given up roaming hoping for a ride. So, nowadays it is very hard to find a ride even if you badly need one for an emergency like going to the hospital. 

Supermarkets are another good indicator of the state of the economy. Many shelves are either empty or half-filled. You no longer feel the abundance of supply that used to be there when you enter. The checkout counter lines are much shorter and those walking along the aisles are much less in number. The amount of goods in the carts is way less, I remember some people used to overflow the cart by the time they reach the checkout counters. And the staff no longer have the cheerful faces they used to have, maybe they themselves feel the pain of the cost of living, which could be next to impossible to manage with the kind of pay they get. 

Overall, I think the crisis is still looming and we have not yet reached the peak. 

I myself have done a lot of changes to my expenditure that could be the case for many 

  • Limit the visit to the shop/supermarket 
  • No eating out anymore 
  • Cut down the driving, unless it is absolutely necessary 
  • Reduce consumption of non-essential items 
  • Cut down on meat, fish, and egg consumption 
  • Check the price tags than used to 

In summary, consumption is way less. I can sense that similar tactics are being adopted by many people. This is clearly driving the demand down. And that would lead to job cuts, for example, the chicken or the fish shop does not need two helpers anymore, they simply cannot afford it. The bigger question is, once one or two of those helpers are let go, what alternate jobs they can find, almost none. We are yet to see the implications of job cuts, at microeconomic levels. 

As for the solutions, job creation for low-skilled workers is a priority. However, it is easier said than done in this economic crisis. For example, in a situation where there is no fertilizer, it is not possible to employ these workers in the agriculture sector as there will not be crops that would enable paying labor in a profitable manner. Feeding the lowest income group will be the greatest challenge. We need to explore solutions in this space. Solutions that are sustainable and empowering are necessary!