Spotlight: Econ Op-eds in Summary (Week ended 04th March'20)
1. Ominously rising foodflation needs medium to long-term strategy to improve agricultural productivity
By: W.A. Wijewardena
· Rising food prices led to a recent increase in inflation levels in Sri Lanka. A prolonged drought and rising producer prices had negated expected price drops. While some higher food prices were blamed on the middlemen, research has suggested that middlemen margins are low for paddy and that higher margins on vegetables are to compensate for the costs including transport and waste.
· Importing food items might create an over-supply as the Maha season stocks come in the next month. At current productivity levels, rice farmers benefit with a low output. The long-term solution to food inflation will be to improve productivity in main agricultural crops in the country. The excess supply from improved yields could be used in producing industrial goods for exporting.
· Paddy cultivation also requires a large quantity of water. In Sri Lanka, while water is supplied almost free, droughts will affect the production. Water-efficient paddy cultivation methods developed worldwide should be adopted. All the stakeholders in the agriculture sector should come together to implement a comprehensive reform strategy targeting the medium to long-term horizon.
2. Debt in Times of Economic Crisis
By: Ahilan Kadirgamar
· Sri Lanka’s economic woes were long in the making, with high debt and efforts to roll over debt with consecutive IMF agreements. These agreements often come with market friendly neo-liberal policies attached to them, which include measures that increase imports and the rapid flow of finance capital. This has only thrown the country further into debt.
· A debt ridden and stagnating economy raises the cost of capital and reduces demand for goods, in effect crippling SMEs, which are major employment creators in Sri Lanka. This in turn would reduce incomes of people, pushing them towards loans with high interest rates which leave them in higher debt.
· One such example was the IMF’s recommendation that the recently implemented rate caps should be temporary. Thus, the alternative to this crisis should begin with barriers against the onslaught of market forces that not only entrap rural women in debt, but harm small businesses and even paralyze states like Sri Lanka.
(Compiled by: Chayu Damsinghe, Promodhya Abeysekara & Asel Hettiarachchi)