Mr. President, do you know the ground reality?

Whilst the rhetoric in Parliament continues on a daily basis, the average household is sinking to an abyss that can lead to absolute anarchy, worse than the Aragalaya if not addressed. Sadly, there seems to be no one who can do anything from the 225.

Let me take data to explain how serious the issue at hand is. Mr. President, time has come to stop globetrotting on funeral diplomacy (from Japan to London) and giving the nation economic theory on TV. Arresting everyone who ‘protests’ will also not work as the University of Peradeniya reports that 9.6 million people are in poverty. Sri Lanka is at a tipping point and you must understand that. 

Macro on red alert 

Let me first share the macro data to give context to the reality in a home. The overall economy has shrunk 8.2% last quarter whilst the interest rates have increased from 8% to 32% which means that businesses cannot access capital from the bank unless one was making supernatural profit. The dollar rate which was at Rs. 203 is today at Rs. 370 which means that a product’s raw material and packaging cost has virtually doubled. From November onwards the corporate tax which will be at 30% means that doing business in Sri Lanka will be near impossible unless the retail price is increased. As of now food inflation is at 85.8% whilst non-food items moved up to 62.8% in September, 2022 which makes Sri Lanka in the top 10 countries globally with the highest food inflation. Who are the others in this table – Venezuela, Sudan, Lebanon, Syria, Zimbabwe and Argentina which explains the performance of our so-called ‘brilliant Central Bank Governors and Treasury officials’ of Sri Lanka. 

Economic hitman 

I would decorate these key officials of Sri Lanka as the ‘Economic hit man’ of the country that must be charged with economic crimes. To be specific, the person who authorised the payment of the 500 million sovereign bond in January, 2022 when the country’s usable foreign reserves were below two weeks. We must not forget the advocates of the ‘home grown model’ when the private sector heads and all top economists advocated that Sri Lanka seek IMF funding. Mr. President, you have been put on alert by UNHCR on this issue and it’s time you take decisive steps to identify those who were responsible for Economic crimes. The 22nd Amendment has given you the teeth to do this task as all in the parliament are Sri Lankan citizens. Let’s not forget that the world is watching us.

Sri Lanka – falling apart 

Whilst the macro data tell us that Sri Lanka must be on red alert we are now seeing what it has done to a Sri Lankan household. UNICEF reported that Sri Lanka has the highest acute malnutrition where for children under 5 years, almost 17% are suffering from chronic wasting – a disease that carries the highest risk of death. It is also reported by UNICEF that 5.7 million people which includes 2.3 million children require humanitarian assistance in Sri Lanka making the country be in the top 10 counties for malnourished children which is serious. 

The latest release by the Peradeniya University states that 42% Sri Lankan households are in poverty. To be specific 9.6 million people. It is sad that top treasury officers who are now consultants are seen in the media stating that poverty is not an issue in Sri Lanka. Such officials must be made known that it is the taxpayers who pay their salary and in fact must be charged in court for distorting facts. Mr. President, it’s time you show your ‘lethal hand’ on such officials as now you are doing this only on the ‘protesting people’ who are fighting to survive. It’s time to see the ground reality Mr. President. 

What policymakers must understand is that food based nutrition is the best for children and pregnant mothers. If this is deprived it will hamper brain development. The policymakers must be accountable and responsible for the statements they make if not very soon such people will be taken to task by the taxpayers of Sri Lanka who are getting axed by 36% from November as announced by Inland Revenue. 

Consumer is sinking 

Whilst the above macro data gets splashed on different media, for the housewife these are only statistics. What she is up against is the reality of how she puts food on the table. Let me share some data at the consumer end. 

Over 50% of the households are stating that they cannot afford to purchase full cream milk powder and Biscuits. To be specific 67% say that they cannot afford to buy cream biscuits and 50% plain biscuits. Mr. President, things are very serious as the consumer ends that you have no cognisant of. From the rhetoric we hear in parliament, the majority are showmen fighting for their survival of their seat than to serve the public. 

We yet hear corruption allegations which are in millions of rupees like the coal scandal that COPE has addressed and financial irregularities like the sugar scandal of Rs. 16 billion, the fertiliser payment of $ 7 million to a Chinese party where Sri Lanka never saw and products and the Japanese light railway project that saw a minister removed and once again appointed by the current president. Sad for Sri Lanka. 

Deep dive 

If one does a deep dive, we see that almost 35% of the households are reducing the quality purchased of full cream milk powder, whilst 21% are moving to smaller packs whilst 18% have stopped the purchase of full cream milk powder (FCMP).The good news is that the number was higher at 27% the month before but now it has come down to only a 18% not purchasing FCMP. But this behaviour will only get worse as when a person with a one hundred thousand income gets taxed 6% and then in multiples the challenge at the household end will only further deteriorate. That is the reality and we have to accept this. 

Another important point to note is the quality of life that is fast declining. If we take the purchasing behaviour of shampoos, almost 24% of households state that they have moved to cheaper brands and 10% state that they do not buy the category. Meaning they have gone back to using soap on their hair. This is very sad given that for brand marketers to rebuild this behaviour will take time. Only a brand marketer understands how hard it is to change consumer behaviour. 

If one takes the washing powder market. Almost 14% have reduced the consumption whilst 21% have shifted to smaller packs and 3% say that they do not buy the category any more. This behaviour too will drastically change given the attack on the purchasing power of a household with the increasing taxes. The consumer behaviour of washing soap 22% of the household has moved to purchasing bulk packs to save on costs while 6% has moved out of the category. It will be interesting to see which category they have moved to. 15% of households have moved to cheaper brands which is obvious. 

Next steps 

Let’s accept this Mr. President that the Sri Lankan consumer is sinking. You will have to use your Presidential executive powers to work out speedy solutions. What other countries who are faced with similar situations are doing is driving commercial agriculture like planting vegetables across the country to bring in food security. A classic example is Egypt. But we do not have not seen such iron fisted economic drives other than the demonstration arrests we see on TV. 

The other is the drive Free Trade Agreements (FTAs) at a macro end with countries like Singapore, Malaysia, China or driving deeper penetration on the FTA with India and Pakistan. Tourism is a brilliant move but Mr. President, we have to focus on the basics of tourism infrastructure like attending to ‘safe drinking water’ in the Nuwara Eliya district which is a burning issue. 

What Sri Lanka requires is focus and ruthless passion for implementation and Mr. President we don’t see this drive other than on the demonstrators. 

(The writer is a former chairman of Sri Lanka Export Development Board, Sri Lanka Tourism, and Lanka Sathosa, whilst he has served British multinationals and the UN for over 20 years. He heads an Indian AI company for Sri Lanka, Maldives and Pakistan.)