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Caught up in a cost of living nightmare

17 Oct 2021

  • Affordability of basic food in Sri Lanka
By Madhusha Thavapalakumar As the weekend receded fast, with Monday approaching in a few hours, most were already feeling “Sunday scaries”. Sunday scaries is a real thing. It gained traction in recent years and it indicates a sense of anxiety on Sunday afternoon or evening while one looks towards another work week ahead. Shattering the usual Sunday scaries, the Government last Sunday (10) night announced a price hike of over 80% to the 12.5 kg Litro liquified petroleum (LP) gas cylinder, the dominant player in the duopoly gas market. The next day, cement prices went up, along with wheat flour, just a few days after prices of imported milk powder went up. The next day morning, the next-door neighbour began to lament, saying that about 20 years ago, when she started cooking, the price of the same quantity gas cylinder from the same supplier was well below Rs. 500, and continued to say that it is strange and also sad that wages are not being increased on a par with the skyrocketing cost of living. That is somewhat true. The cost of living in Sri Lanka is soaring while the minimum wage remains static. Last week, as a number of essential items and food products became more expensive to the general public and they began complaining about the cost of living in the country, as a result switching to cheaper yet undesirable, tiring alternatives as their wages remain the same, or even less than it was about two-and-a-half years ago, due to the pandemic and resultant lay-offs and pay-cuts. Against this background, the Market Mine of The Sunday Morning Business this week felt the need to analyse the affordability of basic food items in Sri Lanka. Minimum wage in Sri Lanka If we are to talk about the cost of living, it is imperative for us to touch upon the subject of minimum wage in our country. Sri Lanka’s minimum monthly wage was Rs. 10,000; however, in March this year, the Government decided to increase the minimum wage by 25% to Rs. 12,500, which means the minimum daily wage is Rs. 500. However, in August 2021, the Department of Labour announced that it has brought up the minimum monthly wage for the private sector to Rs. 16,500, the breakdown of which goes as Rs. 12,500 as the basic salary, Rs. 1,000 as the 2005 Budget allowance, and Rs. 2,500 as the 2016 Budget allowance. This new wage system came into effect from 16 August 2021 and has defined the private sector daily wage to a minimum of Rs. 640. Income and expenditure The last household income and expenditure survey report was compiled in 2016 by the Department of Census and Statistics (DCS). According to this survey, the mean household income per month in Sri Lanka is Rs. 62,237 and differs starkly for the rural, urban, and estate populations. The urban sector’s mean household income per month is Rs. 88,692, while it is Rs. 58,137 for the rural sector and Rs. 34,804 for the estate sector. On the other hand, the median household income per month is Rs. 43,511 in Sri Lanka. Again, the figures are different for each sector, with the urban household making about Rs. 57,833 per month while the rural household earns about Rs. 42,133 and an estate household earns about Rs. 29,134 per month. In terms of expenditure, the mean household expenditure per month in Sri Lanka is Rs. 54,999. The mean household expenditure per month for the urban sector is Rs. 77,337, for the rural sector is Rs. 51,377, and for the estate sector is Rs. 34,851. The estimated average number of income receivers per household in Sri Lanka is 1.8 while the average household population is 3.8. According to the report, among the major categories of household consumption expenditure, the estimated average monthly expenditure on food was Rs. 19,114 and non-food expenditure was Rs.35,885 (including liquor, narcotic drugs, and tobacco) in 2016. Food expenditure As per the report compiled by the DCS, an average household spends Rs. 19,114 per month on food and drinks. They have also provided household expenditure on different food items as a percentage of total expenditure on food and drink. Accordingly, out of this Rs. 19,114, 12.8% is spent on rice, 1% on wheat flour, 2.4% on bread, 9.8% on condiments, 3.6% on pulses, 8% on vegetables, 5.7% on coconuts, 4.8% on meat, 9.5% on fish, 4% on dried fish, 8.2% on milk and milk products, 1.1% on eggs, 3.2% on fruits, 2.2% on sugar, and 23.6% on other food and drink items. If we assume that no changes have been made to the food expenditure level of Rs. 19,114 and the food consumption, an average Sri Lankan household would be purchasing 33.1 kg of rice, as per the report by the DCS. According to the Central Bank of Sri Lanka’s (CBSL) weekly economic indicator report for the first week of October 2021, the retail price of a kilogramme of samba is Rs. 136 while for kekulu (red) it is Rs. 106.40. A household that depends on samba, in this case, has to spend Rs. 4,501 per month while if it is kekulu, it has to spend Rs. 3,521. The DCS report says that the amount of wheat flour purchased by a household in a month is at around Rs. 1.9 kg, and following the recent price revision, wheat flour is priced at Rs. 97 per kilogramme, which brings the total wheat flour expenditure of a Sri Lankan household for a month to Rs. 184. The next item is bread. In a month, a Sri Lankan household purchases an average of 3.6 kg of bread. The current price of a 450 g bread is Rs. 65 and this brings the total expenditure on bread per month to Rs. 520. Then there are pulses; according to the report, a Sri Lankan household purchases 3.1 kg of pulses in any given month. Since the Central Bank has not quoted the prices of pulses, we decided to multiply its percentage in the monthly food expenditure by the average monthly food expenditure of a household (later on divided by hundred) and arrived at Rs. 688. The next item on the list is vegetables, and this too, similar to pulses, was hard to predict as there is no single price for vegetables or fruits as they contain varieties under it and the DCS has not quantified the vegetables used by an average household in a month. Therefore, through the process we followed for pulses, we arrived at a monthly vegetable expenditure figure of Rs. 1,529.12 per month while the fruit expenditure is Rs. 612. Then there are coconuts, which an average household purchases about 27 nuts a month. The price of coconut, as quoted by the CBSL, is about Rs. 85 at the moment, bringing the total monthly coconut expenditure to about Rs. 2,295. Then there is meat, fish, and dried fish. Meat consumption of a Sri Lankan household is surveyed to be 1.8 kg, bringing the monthly expenditure to Rs. 1,181 if it is chicken fillet and Rs. 1,933.65 if it is beef. The prices of per kg meat were obtained from Numbeo, as the Central Bank report does not include meat prices. Expenditure on edible fish in a given month is Rs. 3,936 for kelawalla, Rs. 2,009 for balaya, Rs. 1,238 for salaya, and Rs. 2,050 for hurulla, as a household on average consumes about 4.1 kg of fish, according to the DCS report. In terms of the dry fish requirement, a household spends about Rs. 773 per month. After that, there is milk and milk products, and a household in Sri Lanka consumes on average about Rs. 400 ml of milk on a monthly basis. The Central Bank did not have the prices of milk. However, according to Numbeo, monthly expenditure on milk would be Rs. 106.7. The egg requirement of a household is 12 in a month according to the DCS report, which brings the monthly expenditure to Rs. 196.8, as the Central Bank has quoted the price of an egg as Rs. 16.40. Meanwhile, an average household consumes about 4 kg of sugar monthly, bringing the sugar expenditure to about Rs. 488. DCS has allocated a further Rs. 4,505 for other food and drink expenditure. If we add all these basic food expenditures, we arrive at Rs. 21,515 (in a samba, chicken fillet, hurulla eating household). Certainly above the Rs. 19,114 allocated by the DCS report, and the figures could have been higher if the DCS report has provided the quantity of fruits and vegetables consumed by a household and if the Central Bank report had mentioned prices of pulses, meat, and milk items given that milk powder too went through a price hike. This also means even with a proportional hypothetical increase in allocated monthly food expenditure (not taking into account the pandemic that rendered many without a job), the actual expenditure on basic food items would have been much higher than allocated expenditure. Further, it should be highlighted that anyone with the minimum wage (Rs. 12,500) is nowhere near able to fully afford basic staples that an average Sri Lanka household buys on a monthly basis. The fifth least affordable nation for basic food items In August 2021, UK-based think tank Institute of Development Studies ranked Sri Lanka as the fifth poorest country in the world in terms of food availability. According to the think tank, the report, which was compiled through a publicly available global cost of living database, Numbeo, and released on Tuesday (12), was used in creating a “cost of food basics” analysis that compares the monthly minimum recommended spend on food per adult and the monthly average wage in 107 countries across the world. The Cost of Food Basics found that more than a year after the outbreak of Covid-19, there was a great disparity between countries in terms of the proportion of average wages needed to afford enough food. The minimum recommended monthly food spend per person in Sri Lanka was $ 161.23, while the average monthly wage per adult of the country stood at $ 245.81. “This means that 66% of the average per capita wage should be spent to afford the minimum recommended amount of food for an adult. That’s before considering other costs such as feeding your family or expenses including rent, transportation, utilities, and other non-food purchases,” the report pointed out. However, on the other hand, neighbour India’s minimum recommended monthly expenditure on basic food represented only 27% of the monthly wage. How can Sri Lanka make basic staples more affordable? Lowering import tariffs on food imports would make several basic food items more affordable, but it could have short to medium-term impacts on the government’s tax revenue – a risk Sri Lanka cannot afford to take as its expenditure is soaring while revenue is dwindling. The country needs proper policy measures with regard to tariffs on imported food items, which could even be mutually beneficial trade agreements with selected countries. On the other hand, a production subsidy for local farmers too would reap the desired result in the path of making basic food more accessible and affordable for Sri Lankans. In addition to this, a further reasonable hike in minimum wage too would significantly benefit households in terms of affording basic food items. According to the Economic Policy Institute, a non-partisan think tank, policymakers can help to grow wages by raising the minimum wage; updating overtime rules; strengthening rights to collective bargaining; regularising undocumented workers; ending forced arbitration; securing workers’ access to sick leave and paid family leave; closing race and gender inequities; awarding government contracts only to firms that adhere to wage, health, and safety laws; and tackling workplace abuses such as misclassification and wage theft. Moreover, working towards decreasing the unemployed figures also would make a change. Sri Lanka is in dire need to take measures towards addressing this grave issue before its malnutrition figure soars.


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