COLOMBO -- Sri Lanka's political opposition, importers and traders are up in arms after President Gotabaya Rajapaksa last week declared a state of emergency, allowing his government to dictate retail prices for essential food items and seize stocks from traders, as the country's foreign reserves dry up.
Importers warn the emergency regulation could create a supply crisis, while opposition parties say the move endangers the country and inches it closer to authoritarianism.
Since the Aug. 30 decree, traders and importers have had one meeting after another with trade ministry officials, pleading with them to reverse the decision. The decree gives sweeping powers to Rajapaksa's government to seize stocks of essential items, including sugar and rice, which authorities accuse traders of hoarding.
Adding fuel to fire, the president has appointed M.D.S.P. Niwunhella, a major general in the Sri Lanka Army, as commissioner general of essential services and tasked him with ensuring "the supply of paddy [unharvested rice], rice, sugar and other consumer goods that are essential to maintain the livelihood of the people," according to a news release issued by the president's media division.
"As a democracy for the past 75 years, Sri Lanka has the necessary institutional structure to deal with civil and public service, and oversee such situations," opposition parliamentarian Eran Wickramaratne told Nikkei Asia, expressing concern over the increasing militarization of state institutions. "Unfortunately, since this president came to power, he has not been fully utilizing these institutions and has appointed task forces, which [are] not chaired by relevant people who are qualified in the subject."
Since his election in 2019, Rajapaksa, a former defense secretary, has appointed trusted military personnel to top positions with a view to keeping key government functions under his control. Even Sri Lanka's COVID task force is chaired by Army Commander Shavendra Silva. Other military officers have been appointed to powerful ministry secretary positions, and as head of customs and the port authority.
"The pandemic task force should be staffed by health specialists and experts who have expertise in viruses, but instead the president has put the wrong people in the wrong places," said Wickramaratne. Sri Lanka is currently in the midst of a three-week lockdown aimed at bringing the COVID-19 pandemic under control.
Sri Lanka's main opposition party, the Samagi Jana Balavegaya (SJB), also said in a statement that the state of emergency was declared with ulterior motives, namely, to further wrongfully restrict the fundamental rights of the citizenry and move the country "in the direction of authoritarianism," adding that the state of emergency was uncalled for.
But Trade Minister Bandula Gunawardena said the government had no choice but to appoint a commissioner general to arrest an ongoing conspiracy that was raising prices for essential items such as sugar and rice by creating an "artificial shortage."
On Wednesday, authorities seized 29,000 tons of sugar from several warehouses. The Government Information Department said that from October 2020 to June 2021, a total of 584,000 tons of sugar was imported.
A sugar importer who spoke to Nikkei Asia on condition of anonymity said the emergency decree, which states that importers cannot buy more than a stipulated amount of food items, could have serious implications. "Some of us have a large demand, which we must supply, so we usually house large stocks and distribute [them] based on the requirements. So it's not fair for the government to come and seize our stocks, claiming that we are hoarding," he said.
He said that the continuously depreciating Sri Lankan rupee, is saddling importers with large losses. Last week, the rupee reached an all-time low of 204 rupees per dollar. The currency has fallen 7.5% since the beginning of the year.
In addition to the sugar seizure, the government on Thursday imposed a retail price cap of 125 rupees (62 cents) for a 1 kg bag of refined sugar. At present, the price ranges from 210 to 220 rupees. The maximum price for a local variety of rice called Keeri Samba was set at 125 rupees per kilo as opposed to the latest retail price of 200 rupees.
Over the past few weeks, Sri Lanka has faced severe shortages of powdered milk, cooking gas and kerosene, and people have been seen forming long lines to buy these basic items amid the lockdown. Some say the shortage partially owes to a government ban introduced in March last year that bars imports of motor vehicles, oil, most electronic items, clothing, cosmetics and even spices. It is aimed at conserving foreign currency.
A prominent lawyer based in Colombo stressed that the government was to blame for the food crisis. "The government overnight decided to ban chemical fertilizer [in April this year] and promoted organic fertilizer. This was an ad hoc and capricious policy which contributed to a low harvest. In basic economics, when the output is less, and the demand is high, the price increases," he said.
He pointed out that the emergency regulation has criminalized stocking up on essential food overnight by traders. "It's normally natural that importers and traders always have stocks of especially essential items. The gazette notification is drafted in a draconian way," the lawyer said, referring to the official notice of the decree, adding that "the government must understand that different companies have different demands."
But the island country's foreign reserves fell to $2.8 billion in July, down from $5.6 billion at the end of 2020, providing the government a rationale for the harsh import restrictions. As exports of goods and services were hampered by the pandemic, Sri Lanka's trade deficit has widened, eroding foreign reserves.
Sugar imports are one of the most expensive items in the country's annual import bill of around 40 billion rupees. Sri Lankans are among the world's biggest consumers of sugar per capita, with the average person consuming around 32 kilos annually, compared with an average of 15 kilos in developed countries and 20 kilos in neighboring India. But only 8% to 10% of that demand is met domestically, the rest is covered by imports, said Janaka Nimalachandra, chairman of the government-owned Lanka Sugar Company.
Opposition leaders say addressing Sri Lanka's declining foreign reserves does not require putting the army in charge of the economy.
M.A. Sumanthiran, an opposition member of parliament, said the emergency declaration could lead to repression. "This spells great danger to the country because after this, it'll be the president's rule by himself, making emergency regulations under the public security ordinance. And that can [override] considerations of health, or even food supplies," he said.