Sri Lanka is not battling rising inflation alone. It is also fighting rising food and fuel prices plus flash floods that have ruined crops amidst claims by opposition legislators that the issue of a larger currency denomination note last week means the value of the local currency has halved in the past six years under President Mahinda Rajapaksa's administration. More than 21 months after winning a war against the Tamil Tiger rebels and basking in the glory of that victory, Rajapaksa is learning the truth the hard way that wars alone don't win peace and support of the people. The economic war is now at the president's doorstep with people demanding respite from high prices. The much-heralded war victory is now consigned to history and not the talking point in the cocktail circuit or other public forums. Government support is waning not because of the opposition that is ineffective due to a leadership battle in the main opposition United National Party (UNP), but due to frustration and agony over prices. This year when the national day was celebrated on Feb. 4, there were hardly any flags fluttering from roofs of buildings or homes and vehicles on the street. Last year the day was celebrated with much funfare since the war victory was still fresh in the minds of the people. Local Council elections next month will test the popularity of the ruling United People's Freedom Alliance (UPFA) in general and Rajapaksa's in particular. Most analysts are of the opinion that the voter turnout, normally between 55-60%, will be much lower with people opting to stay away from the polls as a mark of protest as the ruling party will pull off victory anyway. Concern over losing support has also led the government to postpone increasing fuel prices in line with international prices where oil has run over the $100-per barrel mark, at least until the elections are over. Local petrol, diesel and kerosene prices are heavily subsidized and the two main distributors – the state-owned Ceylon Petroleum Corporation and Indian Oil Corporation's Sri Lanka unit, Lanka IOC - are losing heavily. The prices of essential goods such as vegetables and fruits have risen sharply after the January flash floods and non-seasonal rains played havoc with the farms. Thousands of hectares of paddy land have also being ravaged by the floods and affected the rice season. Many an agricultural scientists say it's now difficult for farmers to prepare the land for the rice seasons. Prof. Champa Navaratne, Head of Agriculture Engineering, at Sri Lanka's southern-based Ruhunu University, said erratic weather patterns would create serious food shortages this year. “We do a lot of research to develop better cropping patterns for our farmers based on the weather but this is near impossible now,” she said. Sri Lanka has two rice cropping seasons but in the past six months, she said, farmers in the southern district of Matara alone have had to sow the fields three times, and not just once, because of erratic flash floods. “We'll have a food crisis mid-2011, that's for sure,” she added, a crisis that would add to the government's woes. The Central Bank issued a 5,000-rupee currency note last week. The highest denomination until then was 2,000 rupees, followed by 1,000 rupees, 500 rupees and so on. Earlier – in the second half of 2004 – the last new note issued was in the 2,000 denomination. The latest note is more than double the value of the next highest denomination, which many say is a reflection of how much the rupee has fallen in real-value terms. Harsha de Silva, a well-known economist who is also a parliamentary legislator from the opposition UNP, says the cost of living has more than doubled in the last six years. He said last week that the official index (CCPI) measuring cost of living was 111.6 points in April 2004, when the then ruling UNP lost the parliamentary polls. “By January 2011, the CCPI had climbed up to 231.2,” de Silva said in a statement published in media reports. “This means that the price level during this period has increased by 107% or more than doubled. The purchasing power of the rupee has halved,” it added. In another move to curb rising price of food items, the government has rejected any increase in imported milk powder packed and sold by local companies. Australia, one of the biggest producers of dairy products, has also been badly affected by floods while an increasing global demand for milk from China and India is also pushed up prices by at least 50% above historic averages, according to media reports. Sri Lanka's debt is also rising, according to Finance Ministry officials, and is seen almost doubling in 2012 to a projected $1,539.4 million from $810 million in 2010. Prof. Sirimal Abeyratne, senior economist at University of Colombo, finds fault with the government's agriculture policy particularly in persisting with home gardens and “grow more food” policy. Rajapaksa had urged people to grow food in their backyards and promised support for one million home gardens. That exercise hasn't been successful, and when the floods ravaged crops in January, the president renewed his call for a ‘grow more food' society under the home-gardens concept. “What happened in the 1960 and 1970s? We tried (under a socialist government) to grow more food and stop imports and miserably failed. We are trying to revive archaic ideas that have failed. Home gardens won't accelerate growth. Only investment in industry and manufacturing and large-scale agriculture will increase growth and create jobs,” Prof. Abeyratne said. __
