Subsidies, inflation, and need for A safety net - EDITORIAL

Our country, is in a state of near bankruptcy. We are unable to make payment for even interest payments on debts to international creditors and debts total to over US$52 billion. We have also run out of essentials - fuel, food, and medicines - to keep the country physically and economically alive.
Yet, until the dollar crunch hit us at the beginning of this year, the populace - both rich and poor - continued to enjoy subsidies and welfare state measures on a variety of goods and products.  

Diesel and kerosene were subsidized at the expense of petrol and came under the basket of targeted subsidies. These two items are considered to be used mostly by low income groups including members of the fishing community (diesel being used in public transportation). However, many people – including politicians - took advantage of the cheap diesel costs and use diesel-run cars and luxury vehicles, making a mockery of the scheme.

We have also enjoyed schemes of targeted subsidies and general welfare. 
Targeted subsidies include the ‘Samurdhi poverty alleviation scheme’ where subsidies and incentives are provided to those living below the poverty line. 
According to a 2005 World Bank study, the scheme covered 1.6 million families. The study also revealed that, while many families had moved out of the target group, they continue to enjoy the benefits. It is estimated that of the 1.6 million recipients of this scheme, only 400,000 of them are presently eligible.

General welfare subsidies include fuel, milk powder, LP gas, wheat flour, bread and cement among other items. Health and education too are provided free to the public and does not exclude rich families. Additionally, focused subsidies include fertilizer and other inputs to paddy farmers as well as the tea, rubber and coconut industries. 
Since the financial/dollar crunch hit, subsidies have begun to be cut in a domino- like fashion as the country ran out of dollars to purchase basic imports including basic necessities. 
Earlier, the COVID-19 crisis had led widespread losses in livelihoods. The World Bank report in the aftermath of the Covid-19 pandemic revealed the US$3.20 poverty rate increased from 9.2% in 2019 to 11.7% in 2020 as a result of the crisis. 

The report added that extreme poverty (as measured by the US$1.90 a day poverty line) is projected to have doubled from 2019 levels and is estimated to have increased from 17.9% in 2019 to 20% in 2020, leading to the creation of an additional 500,000 poor people. Implying that not only are there more poor people today, but also that the poor have fallen deeper into poverty.

 Worsening an already bad situation, inflation, year-on-year (Y-o-Y) increased to 58.9% in June 2022 from 45.3% in May 2022 (National Consumer Price Index), meaning the prices of all essentials have nearly doubled.
At the same time, wages have remained static. In actuality, at a number of business places wages and overtime payments have in fact been cut - in some instances by around 50%.

To get out of this situation of indebtedness and achieve an economic turnaround, the government authorities are attempting to negotiate a debt restructuring facility with the International Monetary Fund (IMF). 
To receive such facility, the government has necessarily to provide that agency (IMF) with a sustainable plan of measures it would take to stabilize the economy. 
In other words, it means we are going to see further cuts in welfare measures and subsidies. 
With a large percentage of the working population living below the poverty line and joblessness increasing with closures of small business enterprises, the government must, of necessity, provide a safety net for the less fortunate among our people.

Can our government not apply to international agencies such as the UNICEF and the WHO for grants - as different from aid - to help the more vulnerable sectors of our society tide over this period? At the same time it would be helpful if friendly nations cease pressurizing our government with actions that needle neighbouring friendly countries.
Sri Lanka needs a breathing space to come out its economic crisis. We need all the help we can get, and hence, we would not see more pressure caused by one country/nation trying to one-up its rival at our expense. 

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