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| Food Shortages Sri Lanka: REUTERS image |
Simon Black
Sovereign Man
In ancient Sanskrit, the name means “venerable island,” and the Arabs used to refer to it as “Serendib” for serendipity. Sri Lankans tend to agree– they find their small island of 20 million to be littered with good fortune, and many foreigners will concur.
Sri Lanka is perhaps most famous for its multi-decade civil war between government forces and the separatist Tamil group, which comprises about 10% of the island’s population. The war was long and bloody with both sides carrying on vicious extermination campaigns involving large groups of civilians.
In 2009, the government of Sri Lanka finally declared an end to the war against the Tamils after successfully neutralizing the opposition’s leadership. Left without a cogent head, the Tamils capitulated and the entire country endeavored to rebuild its war-torn economy.
(enthused by the news, international investors bid Sri Lanka’s stock market up by over 100% in 2009; P/E valuations are now in the mid-20s and dividend yields around 1%… not exactly a screaming buy…)
For years, textiles and agriculture dominated the economy, particularly the production of rubber, cinnamon, tea, coffee, grains, and ganja– hey, it’s for medicinal purposes…
The country is now feeling the effects of significant inflation, however, no doubt the result of its policy to keep its currency cheap against the US dollar. Its exports may be strong, but Sri Lanka is importing inflation from the US courtesy of quantitative easing, and locals on the ground are feeling the pinch.
The Sri Lankan rupee has remained artificially suppressed against the dollar while agricultural commodity prices have been steadily rising in dollar terms. This makes food more expensive to locals in Sri Lanka.
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