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