From Pump to Plate: Understanding Oil Price Pass-through in Post-2022 Sri Lanka
Oil price fluctuations have historically impacted the cost of goods and services across the world. As the current global markets show an increase in crude oil prices from USD 65 per barrel prior to the start of the war to USD 102 per barrel (a 59% increase) and signal further increases, Sri Lanka finds itself in a similar, or even more volatile, situation than during the oil price hikes of the Russian-Ukrainian War in 2022.
Sri Lanka’s Current Nutrition Challenges: How Can They Be Addressed?
In the face of recent crises that have undone long-term development gains, nutrition and its related health problems are major concerns for Sri Lanka. The economic downturn following the COVID-19 pandemic, inflation, and supply chain disruptions have exacerbated food and nutrition problems. It has led to a rise in food prices and income losses that significantly constrained the population’s ability to afford a nutritious diet. Amidst macroeconomic uncertainty, less explored approaches, such as shifting away from adverse health behaviours such as smoking and drinking, can create additional space for expenditures to shift toward nutritional needs. It provides a mechanism to improve and diversify diets without relying on significant economic structural transformations in the country. With the upcoming general elections, the voters and policymakers should understand nutritional problems in the country and recognise the crucial role of policy changes, regulations, and advocacy in overcoming nutritional challenges.
Food Fight: Sri Lanka’s Battle for Food Security
World Food Day is observed on 16 October to promote awareness and action to ensure regular access to nutritious food for all. This year’s theme is ‘Leave NO ONE Behind’. Global disruptions including COVID-19, the climate crisis and Russia’s invasion of Ukraine earlier this year, have impacted food supplies worldwide. However, Sri Lanka’s food insecurity is largely a result of the prevailing economic crisis coupled with short-sighted policies enforced by local policymakers, with the burden being highest on the poor and vulnerable. The overnight ban on chemical fertiliser imports has been costly and generated a lower harvest. Although the ban has since been reversed, it continues to have ripple effects on the food system. The blog examines Sri Lanka’s struggle to safeguard food and nutrition security amidst the ongoing economic crisis and outlines policy steps to tackle the challenge.
Stagflation in Sri Lanka? Risks and Policy Responses
The emergence of a low-growth international environment together with a significant rise in inflation has raised concerns of stagflation; a period of low growth combined with high inflation. A global stagflationary environment can worsen Sri Lanka’s current economic crisis restricting growth and increasing inflation. Increased policy rates to combat inflation will result in lower investments. These factors, combined with political instability, lower-than-expected remittances, and lower productivity due to acute shortages of essential items will further constrict the Sri Lankan economy, pushing it into stagflation. Due to a global economic downturn, rising commodity prices and high rates of borrowing, Sri Lanka can expect a challenging external sector environment next year. Policymakers will need to understand these global challenges and make pragmatic economic decisions to minimise further damage to the economy.
Sri Lanka’s Runaway Inflation and the Limits of Monetary Policy
Having kept monetary policy too loose for too long, Sri Lanka started its tightening cycle in August 2021. It signalled firm intentions to regain the Central Bank of Sri Lanka’s (CBSL) focus on price stability by engineering a reduction in demand through high interest rates and withdrawing liquidity from the economy. Effectively, in the current dire growth outlook for Sri Lanka, the policy intention means forcing a recession to tame inflation. In choosing between the options of an aggressive hike that will lead to a recession or tolerating a prolonged inflationary spiral bordering on hyperinflation, the former is preferable. Once inflation takes hold, the damage can be corrosive, especially its deeply regressive impacts on lower income households. But a contractionary strategy to suppress demand will not achieve the desired outcomes if (a) inflation expectations are not well anchored and people expect rapid price increases to continue, and (b) supply side factors remain unaddressed.
Demystifying Hawala/Undiyal – The Not So Dismal Science:[…] believed that informal fund transfer operations in Sri Lanka have expanded considerably due to the wide gap between the…