Inflation drops… but not reflected at the market – EDITORIAL

2 August 2023 04:52 am – 0      – 193

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Inflation has dropped to single digits according to the Colombo Consumer Price Index. Hooray! and three cheers to the economic miracle. Our President and his band of economists need to be congratulated for their handling of the economy.
Ordinary citizens could scarcely forget the nightmare we all went through prior to the then President fleeing the country, and handing our collective destinies into the hands of President Wickremesinghe.
Whether by sheer luck, or because of his political acumen Wickremesinghe was able to make available to a desperate public limited quantities of basic essentials.
Quite happily for us, many of our creditor nations too, were soon lining up to promise much needed support to our debt restructuring efforts. India of course played a significant role, making available substantial quantities of basics and credit lines.
The president and his team were also able to clinch an International Monetary Fund (IMF) facility which helped creditor organizations look at the country as being credit worthy.
The miles-long queues stretching around and in front fuel depots decreased. Systems were put in place regarding the quantities of fuel a person could purchase. Particular dates and places, where fuel would be available in different areas were available and allocated.
Finally a QR code system was introduced and the problem of fuel shortage was successfully tackled temporarily.
Even today the QR code still operates. But fuel prices are still sky high. Compared to the worst days of the Gotabaya presidentship, prices have dropped, but the price of fuel (petrol, diesel, kerosene etc) for instance, is still sky high and beyond the reach of those coming from the poorer sections of society. This section still consists of nearly 45 percent of our society.
Food is available, again at a price. According to UNICEF a large percentage of our population are foregoing meals as they are unable to make ends meet. The most recent rise in the cost of petrol (which came into effect last night) will surely see an increase in the cost of transport leading to a rise in food prices.
For the common man/woman, the best indication of inflation dropping is not the consumer price index, but the practical reality of when he/she goes to the market place to purchase requirements.
Since the Covid-19 Pandemic, followed by the Easter Sunday bombings and finally the financial crisis brought on by a stubborn president who brooked no opposition, led to nearly five-hundred thousand workers losing their employment.
Unfortunately even though certain basics are available in the market, ‘the wolf is still at the door’ for the poor. The economy is still sluggish and has not taken off.
One of the reasons for this was the clamp down on imports -which led to some export oriented industries having to close down as they depended on imports for example of particular packaging materials which became unavailable.
Most small and medium enterprises earlier used to run on overdraft facilities obtained from the banking sector. The prohibitive interest rates charged by banks for this (overdraft) facility has put this beyond the means of small and medium term entrepreneurs and as mentioned earlier caused them to fold up, throwing large numbers of people out of employment.
In turn both led to a the rise in numbers of unemployed and underemployed, leading to a drop in purchasing power.
The closures also led to a drop in production even in the export sector.
There is therefore a need for bank lending rates to be brought down
Today government hopes to earn foreign currency (the lack of which led to the financial crisis ) via the tourist industry. Attracting tourists itself necessitates imports of particular items incoming tourists see as necessities. Government therefore needs to re-look at its import control measures which will, if not rectified, lead to foreign tourists avoiding this country as a prime destination.
While we can necessarily .be happy with our speedy recovery from our debt-ridden state, the present drop in the Colombo Consumer Price Index alone is not the indicator of an economic recovery.
Economic and social stability are important to remain stable but attacks on various aspects of freedom is not the way to achieve this goal.