Sri Lanka gears to face challenges of emerging food crisis

by Lalin Fernandopulle

"Several measures have been taken to develop agriculture and increase food production to face the global food crisis", said Minister of Agriculture Mahinda Yapa Abeywardena.

Minister Mahinda Yapa Abeywardena	Prof. Sirimal Abeyratne

He said there is no need to panic as there are adequate stocks of paddy and added that the price of rice will not be increased.

He said maize cultivation has been affected and import permits have been issued to meet the requirement of animal feed.

The country needs around 225,000 tons of maize a year and around 15,000 tons a month for animal feed.

Large extents of paddy land and animals were destroyed by the recent floods. Estimates revealed that around 157,000 hectares of paddy, 45,000 hectares of field crops, 5,000 hectares of vegetables and around 100,000 animals had been washed away by the incessant rains in the East.

"We have taken steps to provide four bushels of seed paddy per hectare and field crop seed for half a hectare free. Rs. 4,000 will be given per acre of land to affected farmers", Abeywardena said.

The government launched one million home garden units under the Gewathuwagawa program to boost agriculture to reach self-sufficiency in food.

"The program will help increase agricultural production and provide additional income to households", Abeywardena said.

Senior Lecturer, Department of Economics, University of Colombo, Prof. Sirimal Abeyratne said that food inflation is a global problem, and certain local factors have worsened it.

He said there is a short-term supply shortage in many parts of the world due to bad weather and climatic conditions.

"There are long-term demand factors causing a rapid increase in the need for agriculture produce particularly due to the rise in demand for bio-fuel and food from emerging economies", he said.

Prof. Aybeyratne said however, Sri Lanka's food inflation is significantly higher than that of the region, which is a result of domestic and global factors.

Inflation which has been below five percent rose to mid single digit this year following the escalation of world and local food prices.

The price of basic staple food has risen sharply in less than a year: rice by 74 percent, soya 87 percent and wheat by 130 percent.

"Food prices are usually high during the early part of the year due to seasonal factors. A large part of production was also destroyed by bad weather conditions", Prof.Abeyratne said.

The recent floods swept vast swaths of paddy land and killed thousands of animals.

Official estimates revealed that the country lost around 20 percent of the harvest due to the catastrophic weather that wreaked havoc to farm land.

Around 26 people were killed and 300,000 were displaced by the freak weather that lashed across the East and Northern parts of the country. The actual loss to property is yet to be estimated.

Prof. Abeyratne said that the food market has deep rooted weaknesses under which producers and consumers are at a disadvantage due to unprofessional practices along the value chain.

Market manipulation by traders has turned out to be a major problem causing a huge burden on consumers who are at the mercy of exploiters. Hoarding of stocks to boost prices, non-display of price tags and exploitation by middlemen are common today.

"Domestic economic policies also contribute to higher long-term general inflation of the country. The impact of food inflation is widespread across the country and most importantly the impact on interest and exchange rates affect long-term economic growth, investment and trade", he said.

However, the negative repercussions of higher inflation on the economy are difficult to quantify and identify as the link between inflation and macroeconomic variables is less explicit.

The more explicit impact is on the living standards of the people and poverty reduction.

"Is Sri Lanka geared to face global food inflation and sustain economic growth" has been a key concern among economists and analysts.

Analysts believe that Sri Lanka is sitting on a volcano that could erupt any moment provided drastic measures are taken to increase food production and mitigate the impact of climate change.

Prof. Abeyratne said that Sri Lanka has been doing so much but all seems to be aimed at deriving little benefit at a high long-term cost.

When the market is weak there is a justification for government involvement but it should be to improve the market.

"Diverting development strategies and government resources to uplift the standard of domestic agriculture is needed but it is not the long-term solution for high food inflation. The long-term solution is rapid economic growth which translates into high income on which the country can improve its capacity to face the challenges of high food prices", he said.

The Food and Agriculture Organisation has cautioned that the shortage of food and its soaring prices which is a growing reality in many countries could encompass the world within the next year or so.

The looming global food crisis has taken the world by storm with many emerging countries grappling to survive the severe shortage of food and sky-rocketing commodity prices.

The recovery of the global financial crisis and rise in domestic consumption in merging economies have led to a sharp rise in commodity prices.

World food production has been affected by adverse weather conditions across the globe. Brazil and Australia which contribute a major share of the world food production have been affected by extreme weather conditions.

Prof. Abeyratne said countries that are affected most by the world food crisis are poor agricultural countries. Agriculture's share in the USA is only one percent of the GDP but it is four times higher than the GDP of Sri Lanka.

"Despite rhetoric Sri Lanka is among the top 10 countries according to population density and therefore expansion of agricultural land is not an option for the country. Urban concentration without congestion is suitable to promote agricultural production by protecting the country's forest and wildlife", he said.

The rise in world oil prices fuelled by the turmoil in the Middle East and Libya are also major contributors to the surge in global food prices.

Oil prices rose above US$ 105 a barrel last week with speculation that supply to OPEC from Libya, an oil rich country would be reduced sharply.

Estimates suggest that around 25,000 people die daily by hunger, a crisis that has grown due to shortage of food and rise in prices.

Violent protests against rising food prices are threatening peace and stability in many countries in Asia and South America. Protests led by left parties in South India urged the government to slash food prices and assure a stable price for commodities.