Sri Lanka’s poor surge by 4 million to 31% of population survey finds

Reality Check
By Editor_1
Children are going to bed hungry, unsure of where their next meal will come from -Natalia Davidovich / Shutterstock.com

COLOMBO – Sri Lanka’s poor has surged by 4 million to 7 million since 2019 accounting for 31% of the population in 2023, a survey has found.

A 10,000 person survey by LIRNEasia, a regional policy research organization, found that 33% of the respondents had skipped a meal and 47% reduced their meal sizes, after the currency crisis.

About 27% of adults restricted their meals to feed children. The survey was conducted from October 10, 2022 to May 12, 2023.

Sri Lanka started an output gap targeting exercise (Keynesian stimulus), printing large volumes of money and a so-called flexible exchange rate backed by inconsistent policy which saw the rupee collapse in 2022 from 200 to 360 to the US dollar, tearing apart the monetary foundations of families, destroying real salaries and jobs.

Food prices soared partly due to a global commodity bubble fired by the Federal Reserve and also import restrictions from forex shortages and disruption to agriculture from a fertilizer ban.

Agro-chemicals were banned to ‘save’ 300 to 400 million dollars in foreign exchange, the government said at the time.

Rohan Samarajiva Chair of LIRNEasia said he searched for historical data and found a thesis done by one M. Salgado, which estimated gross domestic product during the Great Depression.

“He talked about the Great Depression affecting Sri Lanka and how our per capita income, which was about 80 dollars, went down by about half over a period of four years,” Samarajiva told a forum where research findings was released.

The Great Depression was a ‘deflationary collapse’ during the 1930s that came in the wake of the Federal Reserve firing the ‘roaring 20s bubble’ after accidentally inventing the policy rate giving power to economists to mis-target interest rates, analysts have said.

Sri Lanka at the time however did not have a central bank to trigger a currency collapse. Food prices fell steeply during the Great Depression. In a central bank currency crisis, the worst hit are wage earners whose salaries do not go up as prices rise with a collapse of the value of domestic money.

From March 2023, Sri Lanka central bank has appreciated the currency with deflationary policy, allowing food prices to fall.

In Sri Lanka poverty among Sri Lanka’s plantation worker families was already high at 31% by 2019, based on a household income and expenditure survey (HIES 2019) of the state statistics office.

“This has worsened in 2023. Now more than half our estate workers are living below the poverty line,” Tharaka Amarsinghe, a researcher at LIRNEasia said.

In the rest of rural Sri Lanka poverty has doubled from 15 to 32% from 2019 to 2023.

In urban areas, which are densely populated, poverty tripled to 6 to 18%.

About 32% of families had sold household assets and 50% had run down their savings.

Another 6% did not send their children to school, indicating that 203,000 children did not attend school. Parents had mentioned that they did not have exercise books and had to make up books from empty pages of old books, according to a panellist.

Sri Lanka has a number of government income support programs, chief among them the program known as Samurdhi.

The survey found that 1.7 million families got Samurdhi benefits but only 40% were poor or below the official poverty line Gayani Hurrulle, Senior Research Manager at LirneAsia said.

About 4% were in the richest income decile, 5% were in the next.

Only 17% who were on Samurdhi benefits have exited the program. Opaque criteria including attending political meetings were used by Samurdhi officials to admit new applicants, respondents to the survey had said.

Sri Lanka is now starting a new program called Aswesuma, which will consolidate existing schemes including Samurdhi, an old age benefit scheme and kidney patient’s support.

Applicants would be able to enter and exit based on set criteria.

The new scheme would come into effect from July 1. At the moment applications have closed as the beneficiaries are being processed.

But it will be reopened after it starts operating, B. Wijayarante, Chairman of Sri Lanka’s Welfare Benefits Board said.

Applicants who are rejected in the first round could appeal. The first round of data was collected by enumerators. In the future applications could be made online.

-economynext.com

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