Sri Lanka is urging farmers to increase rice production as the country faces its worst economic crisis in more than 70 years. The country’s agriculture minister issued the appeal, claiming that the country’s “food situation is deteriorating.”

It comes as severe shortages of necessities, especially food, have contributed to inflation, or the rate at which prices grow, reaching a new high. Also on Tuesday, the government raised taxes to help pay for necessities such as petrol and food.

The pandemic, soaring energy prices, and populist tax cuts have all wreaked havoc on the island nation of 22 million people. A chronic lack of foreign cash, along with skyrocketing inflation, has resulted in a scarcity of medicines, fuel, and other necessities.

Agriculture Minister Mahinda Amaraweera told journalists that “it is apparent that the food crisis is worsening.”

“We request all farmers to step into their fields in the next five to ten days and cultivate paddy [rice],” he added.

As Prime Minister Ranil Wickremesinghe has warned of serious food shortages by August, Sri Lankan officials have been seeking for measures to increase food production.

According to the Financial Times, the country is also seeking assistance from a South Asian food bank, which has provided rice and other supplies to countries in need.

In an interview, Food Commissioner J Krishnamoorthy informed the newspaper that her department had “just begun the process” of requesting “food bank aid” from the South Asian Association for Regional Cooperation (SAARC).

Sri Lanka, according to Krishnamoorthy, is looking for roughly 100,000 metric tonnes of food in the form of donations or subsidised sales.

The SAARC is an association of eight South Asian countries. It includes Sri Lanka and India, which is quickly becoming one of Sri Lanka’s largest aid providers.

There were no comments from Sri Lanka’s Food Commissioners Department and the SAARC.

The Sri Lankan government announced an immediate rise in value added tax (VAT) from 8 per cent to 12 per cent on Tuesday. The move is intended to increase government revenue by 65 billion Sri Lankan rupees ($179.9 million).

It further stated that corporation tax would be raised from 24% to 30% in October.

Earlier this year, then-Sri Lankan Finance Minister Ali Sabry told the BBC that raising VAT was necessary.

He stated that the country would require $4 billion in imports of daily necessities during the next eight months. Also on Tuesday, official numbers indicated that Sri Lanka’s inflation rate climbed to a record 39.1 per cent in May from the previous year. It had previously reached a high of 29.8 per cent in April.

Inflation decreases the buying power of money by requiring more money to purchase the same products.

People are worse off if income does not increase at the same rate as inflation. As a result of making fewer purchases from businesses, they may spend less. Sri Lanka defaulted on its debt for the first time in history last month, when the grace period to pay $78 million in overdue debt interest payments ended.

Governments default when they are unable to make some or all of their debt payments to creditors. It can undermine a country’s reputation with investors, making it more difficult for it to borrow money on foreign markets, further eroding faith in its currency.

(Adapted from BBC.com)

Categories: Economy & Finance, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy, Sustainability