Speaker 1: Hello, I'm Sona Ramesh from the money mind team. You
Speaker 1: probably still remember those images of people queuing for hours
Speaker 1: for petrol and even food in Sri Lanka at the
Speaker 1: height of its economic crisis. Last year, the country is
Speaker 1: still finding its way out of its worst financial crisis
Speaker 1: in decades which gave it the infamous title of having
Speaker 1: the fastest inflation rate in Asia at one point hitting 70%
Speaker 1: year on year. Things do seem to be looking up
Speaker 1: with fresh
Speaker 1: funds from the International Monetary Fund. Now coming in, inflation
Speaker 1: numbers have also eased. It was around 35% in April
Speaker 1: but the road ahead is long with the government and
Speaker 1: people having to tighten their purse strings to get the
Speaker 1: economy back on track. So what's it like living and
Speaker 1: running a business in a country facing such tough times?
Speaker 1: Joining me for a peek at life in Sri Lanka.
Speaker 1: Today is Dmitry core. Dimitri is a third generation leader
Speaker 1: of Sri Lanka's Jet Wing Hotel Group.
Speaker 1: Tell us a little bit about the business.
Speaker 2: Thanks for I'm Dimitri, Deputy managing director of Hotels. Jet
Speaker 2: Hotels was founded in 1973 by my grandfather and we
Speaker 2: just celebrated the 50 years of operation in Sri Lanka.
Speaker 2: We have 35 properties spread across the island. We specialize
Speaker 2: in anything to do with hospitality in Sri Lanka. And
Speaker 2: we are a family run business. So
Speaker 1: how has inflation affected the way that the business is run?
Speaker 2: There has been a significant impact since the inflation hit
Speaker 2: towards the middle of a little towards July August last year.
Speaker 2: When all these problems arose, the cost of operation from
Speaker 2: items like electricity, gas and fuel have really gone up.
Speaker 2: And of course, when the fuel prices increase as of
Speaker 2: impact in when it comes to food and other commodities
Speaker 2: as well, if you take even simple things like eggs,
Speaker 2: for example,
Speaker 2: it's uh from about uh ₹20 and it, it went
Speaker 2: up to about 55 ₹60. Most things went up by
Speaker 2: about 23 times in France. Of course, with the devaluation
Speaker 2: of the rupee, anything imported was impacted, but even locally
Speaker 2: produced items went up due to cost of distribution uh deliveries.
Speaker 2: All these uh had a impact when it came to
Speaker 2: food and other items,
Speaker 2: we need to operate our business. Could you give
Speaker 1: me specifics? Like how much did your bills go up by?
Speaker 1: For example,
Speaker 2: if you compare last March to this March, the cost
Speaker 2: of food items would have gone up by 23 times.
Speaker 2: Our electricity bills have gone up by almost 70%. Fuel
Speaker 2: has gone up by more than double as well. The
Speaker 2: only good news is things have stabilized in the last
Speaker 2: couple of months at one stage, prices fluctuated a lot,
Speaker 2: but
Speaker 2: things are stabilized. So at least now we can plan
Speaker 2: out when things are fluctuating. It was very difficult to
Speaker 2: set a price as well because even if you have
Speaker 2: things like weddings and functions, people good six months, one
Speaker 2: year in advance and then it's very difficult to give
Speaker 2: a price one year in advance. How
Speaker 1: have you had to adjust the businesses expenditure to cope?
Speaker 1: We
Speaker 2: as a company, we have always believed in mainly using
Speaker 2: locally sourced products,
Speaker 2: anything which is not essential which is imported. We have
Speaker 2: actually put a complete stop. Now, Sri Lanka is uh
Speaker 2: of course blessed by being a tropical island. We have
Speaker 2: a lot of fruits, vegetables and plenty of seafood, but
Speaker 2: the things we stopped after these prices were imported beef
Speaker 2: from Australia and so on. Uh lamb, some oil varieties, speciality,
Speaker 2: rice varieties and so on which is used to import.
Speaker 2: So those type of things we stopped wherever possible. We
Speaker 2: just found alternatives locally and concentrating on offering the tourist
Speaker 2: something the most Sri Lankan locally inspired.
Speaker 1: Most of your customers are tourists or wealthiest Sri Lankans.
Speaker 1: Have you had to pass on costs to them?
Speaker 2: Yes. Uh It was not only the revision of prices
Speaker 2: but also there were indirect taxes which was increased
Speaker 2: like the value added tax, which was earlier at 8%
Speaker 2: was increased to 15%. Then there was a new tax
Speaker 2: in introduced social security levy. That's another 2.5%. So there
Speaker 2: have been these type of taxes which have also been
Speaker 2: added on. Plus so all
Speaker 2: of those have also contributed to the increase. So yes, unfortunately,
Speaker 2: we have had to pass on those increases to our
Speaker 2: consumers because there's no way for the hotel or any
Speaker 2: other business to absorb such an increase in prices. So yes,
Speaker 2: those have been passed on.
Speaker 1: So here's what double digit inflation means for consumers and
Speaker 1: businesses in Sri Lanka, higher food, electricity and fuel costs
Speaker 1: across the board. And some like Hotel Group Jet Wing
Speaker 1: have had their food bill go up by 2 to
Speaker 1: 3 times. They've adjusted by reducing their reliance on imported products.
Speaker 1: And it's not just the price of goods and services
Speaker 1: that have gone up, new taxes have added to those
Speaker 1: rising prices and many businesses have had to pass on
Speaker 1: these extra costs to the consumers. Dimitri you employ over
Speaker 1: 3000 workers who must be feeling the pinch as well.
Speaker 1: Have you been able to
Speaker 2: help our employees and have been very badly impacted
Speaker 2: with the rise in inflation. Plus, like I mentioned, the
Speaker 2: taxes are not. So it's not only the India taxes
Speaker 2: to businesses, but personal taxes have also gone up and
Speaker 2: the tax brackets were lowered as a result. Most of
Speaker 2: the people fall into some form of taxation. So we
Speaker 2: as a company across the board increase our salaries by 20%.
Speaker 2: It's to give a little leeway. So our greatest asset
Speaker 2: is our people. And though our business is also still
Speaker 2: not doing as well as we want to, but we
Speaker 2: wanted to make sure that we at least in our
Speaker 2: own way, try to help reduce the burden of the people.
Speaker 2: So by increasing the salaries, at least
Speaker 2: some, what allows them to mitigate some of the challenges,
Speaker 2: we'll try our level best to support them and move on.
Speaker 1: And do you feel like things have stabilized somewhat at
Speaker 1: least since the height of the crisis?
Speaker 2: Well, last week, the IMF money, of course help. Plus
Speaker 2: there have been a few other donor agencies in the
Speaker 2: last couple of months. We have also helped the country
Speaker 2: by sending all reported
Speaker 2: dollars in which we required for our imports. And what
Speaker 2: I can say is the other advantage is six months,
Speaker 2: 67 months back that we had a shortage of foreign
Speaker 2: currency in the country. Plus there was uh food security,
Speaker 2: uh shortage of fuel shortage of lot of LP G
Speaker 2: and so on.
Speaker 2: Now, since December, we haven't had that problem. Yes, fuel
Speaker 2: is given on a quota but it's still sufficient for
Speaker 2: people to go around and uh for the industries like
Speaker 2: tourism and essential services. Those quotas are not in place
Speaker 2: if you're on a one week tour Australia. You don't
Speaker 2: have to worry.
Speaker 2: You can travel around the island in a private vehicle
Speaker 2: and whatever the required for you will be able to get.
Speaker 2: So those type of things are now in order and
Speaker 2: even when it comes to food or, uh, and stuff
Speaker 2: like that, it's available. So it's easier for us to
Speaker 2: plan out and serve our clients. And are
Speaker 1: you optimistic that things will get better? Now
Speaker 1: the IMF deal is in
Speaker 2: place. Oh, definitely, definitely. We are very confident, Sri Lanka
Speaker 2: has always been a very resilient country. We have gone
Speaker 2: through a lot and the Sri Lankan people are very
Speaker 2: resilient as a company, we have gone through everything from
Speaker 2: since 73. There was for 10, for almost 10 years,
Speaker 2: there was very good business
Speaker 2: in the late mid to late seventies. Then of course,
Speaker 2: in the early eighties, there was the civil war, we
Speaker 2: broke out which lasted almost 30 years. Then we had
Speaker 2: the tsunami in 2004, then we had the Easter attacks,
Speaker 2: COVID and all this. But
Speaker 2: we have survived and we are very confident with the
Speaker 2: help of the IMF and other countries and other donor
Speaker 2: agencies that we can definitely uh bounce back. And if
Speaker 2: there is proper governance and proper leadership given, I think
Speaker 2: it's very important that the leadership of this country gives
Speaker 2: confidence to the youth
Speaker 2: actually sometimes disheartened to see a lot of the youth
Speaker 2: leaving the country, the educated youth, a lot of my
Speaker 2: friends are included uh leaving uh in our early thirties.
Speaker 2: So if the youth leave the country, then we are
Speaker 2: having a real drainage of brain power and brain drain.
Speaker 2: Do you feel
Speaker 1: like things might get worse before they get better? I
Speaker 1: think
Speaker 2: people have changed their lifestyle. I think everybody has to
Speaker 2: change their lifestyle if you were living in a certain way,
Speaker 2: like if you were drinking, maybe single m my for example,
Speaker 2: now you may want to have a local spirit.
Speaker 2: So small team, it may be a trivial team, but
Speaker 2: you change your lifestyle and uh try to make changes
Speaker 2: which will help the country. So yes, that will be
Speaker 2: the next year, year and a half will be challenging.
Speaker 2: There will be challenges and of course, we have to
Speaker 2: always remember even the IMF money which we are getting
Speaker 2: is it's a loan, it's not a grant, we have
Speaker 2: to pay it back. So it's just helping us cushion
Speaker 2: the problem at the moment.
Speaker 2: And uh if he did that to a whole, at
Speaker 2: least the same man, then we might fall into this
Speaker 2: same hover. So it's politicians, plus all the citizens who
Speaker 2: have to be responsible in what they do and uh
Speaker 2: come out of this problem.
Speaker 1: So a long road ahead for Sri Lanka as it
Speaker 1: tries to navigate its way out of its worst financial
Speaker 1: crisis since independence, it needs to boost tax revenue as
Speaker 1: part of the terms of an international bailout. So that
Speaker 1: means people are having to pay new types of tax
Speaker 1: and more people are liable for income tax. People are
Speaker 1: also having to change their lifestyles with businesses swapping out
Speaker 1: imported items with local products.
Speaker 1: The economic crisis is also sparking a fresh brain drain.
Speaker 1: Government figures show that over 300,000 Sri Lankans left the
Speaker 1: country to work overseas in 2022. That's the highest number
Speaker 1: in history.
Speaker 1: My thanks to Dmitry Kuri of the Jet Group for
Speaker 1: joining me on this podcast. That's five things you need
Speaker 1: to know about living and operating a business in Sri
Speaker 1: Lanka's economic crisis. Money mind is every Saturday at 10
Speaker 1: 30 PM on C N A. You can also catch
Speaker 1: us online at C N A dot Asia or on youtube.