WEBVTT - 5 things about living with runaway inflation

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<v Speaker 1>Hello, I'm Sona Ramesh from the money mind team. You

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<v Speaker 1>probably still remember those images of people queuing for hours

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<v Speaker 1>for petrol and even food in Sri Lanka at the

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<v Speaker 1>height of its economic crisis. Last year, the country is

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<v Speaker 1>still finding its way out of its worst financial crisis

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<v Speaker 1>in decades which gave it the infamous title of having

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<v Speaker 1>the fastest inflation rate in Asia at one point hitting 70%

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<v Speaker 1>year on year. Things do seem to be looking up

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<v Speaker 1>with fresh

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<v Speaker 1>funds from the International Monetary Fund. Now coming in, inflation

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<v Speaker 1>numbers have also eased. It was around 35% in April

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<v Speaker 1>but the road ahead is long with the government and

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<v Speaker 1>people having to tighten their purse strings to get the

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<v Speaker 1>economy back on track. So what's it like living and

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<v Speaker 1>running a business in a country facing such tough times?

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<v Speaker 1>Joining me for a peek at life in Sri Lanka.

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<v Speaker 1>Today is Dmitry core. Dimitri is a third generation leader

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<v Speaker 1>of Sri Lanka's Jet Wing Hotel Group.

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<v Speaker 1>Tell us a little bit about the business.

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<v Speaker 2>Thanks for I'm Dimitri, Deputy managing director of Hotels. Jet

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<v Speaker 2>Hotels was founded in 1973 by my grandfather and we

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<v Speaker 2>just celebrated the 50 years of operation in Sri Lanka.

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<v Speaker 2>We have 35 properties spread across the island. We specialize

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<v Speaker 2>in anything to do with hospitality in Sri Lanka. And

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<v Speaker 2>we are a family run business. So

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<v Speaker 1>how has inflation affected the way that the business is run?

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<v Speaker 2>There has been a significant impact since the inflation hit

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<v Speaker 2>towards the middle of a little towards July August last year.

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<v Speaker 2>When all these problems arose, the cost of operation from

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<v Speaker 2>items like electricity, gas and fuel have really gone up.

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<v Speaker 2>And of course, when the fuel prices increase as of

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<v Speaker 2>impact in when it comes to food and other commodities

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<v Speaker 2>as well, if you take even simple things like eggs,

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<v Speaker 2>for example,

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<v Speaker 2>it's uh from about uh ₹20 and it, it went

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<v Speaker 2>up to about 55 ₹60. Most things went up by

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<v Speaker 2>about 23 times in France. Of course, with the devaluation

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<v Speaker 2>of the rupee, anything imported was impacted, but even locally

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<v Speaker 2>produced items went up due to cost of distribution uh deliveries.

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<v Speaker 2>All these uh had a impact when it came to

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<v Speaker 2>food and other items,

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<v Speaker 2>we need to operate our business. Could you give

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<v Speaker 1>me specifics? Like how much did your bills go up by?

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<v Speaker 1>For example,

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<v Speaker 2>if you compare last March to this March, the cost

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<v Speaker 2>of food items would have gone up by 23 times.

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<v Speaker 2>Our electricity bills have gone up by almost 70%. Fuel

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<v Speaker 2>has gone up by more than double as well. The

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<v Speaker 2>only good news is things have stabilized in the last

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<v Speaker 2>couple of months at one stage, prices fluctuated a lot,

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<v Speaker 2>but

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<v Speaker 2>things are stabilized. So at least now we can plan

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<v Speaker 2>out when things are fluctuating. It was very difficult to

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<v Speaker 2>set a price as well because even if you have

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<v Speaker 2>things like weddings and functions, people good six months, one

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<v Speaker 2>year in advance and then it's very difficult to give

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<v Speaker 2>a price one year in advance. How

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<v Speaker 1>have you had to adjust the businesses expenditure to cope?

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<v Speaker 1>We

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<v Speaker 2>as a company, we have always believed in mainly using

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<v Speaker 2>locally sourced products,

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<v Speaker 2>anything which is not essential which is imported. We have

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<v Speaker 2>actually put a complete stop. Now, Sri Lanka is uh

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<v Speaker 2>of course blessed by being a tropical island. We have

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<v Speaker 2>a lot of fruits, vegetables and plenty of seafood, but

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<v Speaker 2>the things we stopped after these prices were imported beef

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<v Speaker 2>from Australia and so on. Uh lamb, some oil varieties, speciality,

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<v Speaker 2>rice varieties and so on which is used to import.

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<v Speaker 2>So those type of things we stopped wherever possible. We

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<v Speaker 2>just found alternatives locally and concentrating on offering the tourist

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<v Speaker 2>something the most Sri Lankan locally inspired.

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<v Speaker 1>Most of your customers are tourists or wealthiest Sri Lankans.

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<v Speaker 1>Have you had to pass on costs to them?

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<v Speaker 2>Yes. Uh It was not only the revision of prices

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<v Speaker 2>but also there were indirect taxes which was increased

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<v Speaker 2>like the value added tax, which was earlier at 8%

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<v Speaker 2>was increased to 15%. Then there was a new tax

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<v Speaker 2>in introduced social security levy. That's another 2.5%. So there

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<v Speaker 2>have been these type of taxes which have also been

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<v Speaker 2>added on. Plus so all

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<v Speaker 2>of those have also contributed to the increase. So yes, unfortunately,

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<v Speaker 2>we have had to pass on those increases to our

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<v Speaker 2>consumers because there's no way for the hotel or any

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<v Speaker 2>other business to absorb such an increase in prices. So yes,

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<v Speaker 2>those have been passed on.

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<v Speaker 1>So here's what double digit inflation means for consumers and

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<v Speaker 1>businesses in Sri Lanka, higher food, electricity and fuel costs

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<v Speaker 1>across the board. And some like Hotel Group Jet Wing

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<v Speaker 1>have had their food bill go up by 2 to

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<v Speaker 1>3 times. They've adjusted by reducing their reliance on imported products.

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<v Speaker 1>And it's not just the price of goods and services

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<v Speaker 1>that have gone up, new taxes have added to those

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<v Speaker 1>rising prices and many businesses have had to pass on

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<v Speaker 1>these extra costs to the consumers. Dimitri you employ over

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<v Speaker 1>3000 workers who must be feeling the pinch as well.

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<v Speaker 1>Have you been able to

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<v Speaker 2>help our employees and have been very badly impacted

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<v Speaker 2>with the rise in inflation. Plus, like I mentioned, the

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<v Speaker 2>taxes are not. So it's not only the India taxes

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<v Speaker 2>to businesses, but personal taxes have also gone up and

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<v Speaker 2>the tax brackets were lowered as a result. Most of

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<v Speaker 2>the people fall into some form of taxation. So we

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<v Speaker 2>as a company across the board increase our salaries by 20%.

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<v Speaker 2>It's to give a little leeway. So our greatest asset

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<v Speaker 2>is our people. And though our business is also still

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<v Speaker 2>not doing as well as we want to, but we

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<v Speaker 2>wanted to make sure that we at least in our

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<v Speaker 2>own way, try to help reduce the burden of the people.

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<v Speaker 2>So by increasing the salaries, at least

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<v Speaker 2>some, what allows them to mitigate some of the challenges,

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<v Speaker 2>we'll try our level best to support them and move on.

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<v Speaker 1>And do you feel like things have stabilized somewhat at

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<v Speaker 1>least since the height of the crisis?

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<v Speaker 2>Well, last week, the IMF money, of course help. Plus

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<v Speaker 2>there have been a few other donor agencies in the

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<v Speaker 2>last couple of months. We have also helped the country

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<v Speaker 2>by sending all reported

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<v Speaker 2>dollars in which we required for our imports. And what

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<v Speaker 2>I can say is the other advantage is six months,

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<v Speaker 2>67 months back that we had a shortage of foreign

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<v Speaker 2>currency in the country. Plus there was uh food security,

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<v Speaker 2>uh shortage of fuel shortage of lot of LP G

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<v Speaker 2>and so on.

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<v Speaker 2>Now, since December, we haven't had that problem. Yes, fuel

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<v Speaker 2>is given on a quota but it's still sufficient for

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<v Speaker 2>people to go around and uh for the industries like

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<v Speaker 2>tourism and essential services. Those quotas are not in place

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<v Speaker 2>if you're on a one week tour Australia. You don't

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<v Speaker 2>have to worry.

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<v Speaker 2>You can travel around the island in a private vehicle

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<v Speaker 2>and whatever the required for you will be able to get.

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<v Speaker 2>So those type of things are now in order and

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<v Speaker 2>even when it comes to food or, uh, and stuff

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<v Speaker 2>like that, it's available. So it's easier for us to

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<v Speaker 2>plan out and serve our clients. And are

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<v Speaker 1>you optimistic that things will get better? Now

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<v Speaker 1>the IMF deal is in

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<v Speaker 2>place. Oh, definitely, definitely. We are very confident, Sri Lanka

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<v Speaker 2>has always been a very resilient country. We have gone

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<v Speaker 2>through a lot and the Sri Lankan people are very

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<v Speaker 2>resilient as a company, we have gone through everything from

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<v Speaker 2>since 73. There was for 10, for almost 10 years,

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<v Speaker 2>there was very good business

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<v Speaker 2>in the late mid to late seventies. Then of course,

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<v Speaker 2>in the early eighties, there was the civil war, we

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<v Speaker 2>broke out which lasted almost 30 years. Then we had

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<v Speaker 2>the tsunami in 2004, then we had the Easter attacks,

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<v Speaker 2>COVID and all this. But

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<v Speaker 2>we have survived and we are very confident with the

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<v Speaker 2>help of the IMF and other countries and other donor

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<v Speaker 2>agencies that we can definitely uh bounce back. And if

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<v Speaker 2>there is proper governance and proper leadership given, I think

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<v Speaker 2>it's very important that the leadership of this country gives

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<v Speaker 2>confidence to the youth

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<v Speaker 2>actually sometimes disheartened to see a lot of the youth

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<v Speaker 2>leaving the country, the educated youth, a lot of my

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<v Speaker 2>friends are included uh leaving uh in our early thirties.

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<v Speaker 2>So if the youth leave the country, then we are

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<v Speaker 2>having a real drainage of brain power and brain drain.

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<v Speaker 2>Do you feel

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<v Speaker 1>like things might get worse before they get better? I

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<v Speaker 1>think

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<v Speaker 2>people have changed their lifestyle. I think everybody has to

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<v Speaker 2>change their lifestyle if you were living in a certain way,

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<v Speaker 2>like if you were drinking, maybe single m my for example,

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<v Speaker 2>now you may want to have a local spirit.

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<v Speaker 2>So small team, it may be a trivial team, but

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<v Speaker 2>you change your lifestyle and uh try to make changes

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<v Speaker 2>which will help the country. So yes, that will be

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<v Speaker 2>the next year, year and a half will be challenging.

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<v Speaker 2>There will be challenges and of course, we have to

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<v Speaker 2>always remember even the IMF money which we are getting

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<v Speaker 2>is it's a loan, it's not a grant, we have

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<v Speaker 2>to pay it back. So it's just helping us cushion

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<v Speaker 2>the problem at the moment.

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<v Speaker 2>And uh if he did that to a whole, at

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<v Speaker 2>least the same man, then we might fall into this

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<v Speaker 2>same hover. So it's politicians, plus all the citizens who

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<v Speaker 2>have to be responsible in what they do and uh

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<v Speaker 2>come out of this problem.

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<v Speaker 1>So a long road ahead for Sri Lanka as it

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<v Speaker 1>tries to navigate its way out of its worst financial

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<v Speaker 1>crisis since independence, it needs to boost tax revenue as

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<v Speaker 1>part of the terms of an international bailout. So that

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<v Speaker 1>means people are having to pay new types of tax

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<v Speaker 1>and more people are liable for income tax. People are

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<v Speaker 1>also having to change their lifestyles with businesses swapping out

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<v Speaker 1>imported items with local products.

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<v Speaker 1>The economic crisis is also sparking a fresh brain drain.

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<v Speaker 1>Government figures show that over 300,000 Sri Lankans left the

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<v Speaker 1>country to work overseas in 2022. That's the highest number

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<v Speaker 1>in history.

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<v Speaker 1>My thanks to Dmitry Kuri of the Jet Group for

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<v Speaker 1>joining me on this podcast. That's five things you need

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<v Speaker 1>to know about living and operating a business in Sri

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<v Speaker 1>Lanka's economic crisis. Money mind is every Saturday at 10

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<v Speaker 1>30 PM on C N A. You can also catch

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<v Speaker 1>us online at C N A dot Asia or on youtube.