Colombo – The Sri Lankan government has declared a food emergency due to the unavailability of foreign exchange for food imports. The Sri Lankan government has blamed the Coronavirus pandemic for the shortage of foreign currency reserves. However, analysts and media are claiming that a large amount of foreign exchange is being spent on the funds required to repay the loan taken from China.
On Tuesday, Sri Lankan President Gotabaya Rajapaksa declared a food emergency. Accordingly, action will be taken against traders who stockpile food grains. If food grains are found to be stored, they will be confiscated. At the same time, there is an obligation to sell food grains at the rates fixed by the government. A former military officer has been appointed to the body responsible for essential items and has been given the power to take action.
The Sri Lankan currency has depreciated by 7.5% against the US dollar in the current year. The exchange rate of foreign currency has risen, which has affected imports. Sri Lanka is dependent on imports for food grains and other essential commodities. As a result, everything imported is said to have become expensive. This includes food as well as fuel. Sri Lanka’s foreign exchange reserves have been declining rapidly as imports have continued to rise.
Two years ago, Sri Lanka had USD 7.5 billion in foreign exchange reserves. At the end of July, however, there were barely USD 2.8 billion left. Of that, more than USD 1 billion is said to be needed to repay foreign debt. To overcome this economic crisis, the Sri Lankan government has begun efforts to obtain funding from the International Monetary Fund, along with India and China.
The government has blamed the Coronavirus pandemic for the scarcity of foreign exchange. The government said that the Coronavirus pandemic has stopped the flow of foreign tourists, which is the primary source of foreign exchange. The Sri Lankan government claims that tourism accounts for five per cent of GDP. Its complete closure has led to a crisis of scarcity of foreign exchange. However, analysts and the media have pointed at the issue of borrowing from China.
More than 10% of Sri Lanka’s total foreign debt is owed to China. Analysts have pointed out that Sri Lanka’s delay in repaying the Chinese debt could have led to the Sri Lankan government handing over its port to the Chinese regime in the past. Even now, the media is claiming that the foreign exchange reserves are leaking due to the billions of dollars being spent on repaying China’s debt.
Analysts have blamed Sri Lanka’s Rajapaksa government for taking decisions favouring China, even as loans from China appear to be part of predatory economic strategies.