Photo courtesy of The World Bank
The impact of the economic crisis on the working class poor of Colombo over the past year cannot be overstated. Many of these households were already affected by the pandemic due to a loss of daily wage work following the imposition of COVID-19 lockdowns and were struggling to make ends meet when the economic crisis hit last year.
As of February 2023, CCPI based headline inflation was 50.6%, while food inflation (Y-o-Y) was at 54.4% in the same month. In September 2022, Sri Lanka recorded its highest food inflation at 94.5%. In December of last year, 33% of all households were deemed food insecure, while 68% of households were seen to be using food coping strategies to deal with the rising food prices.Low income households were also affected by the hike in bus fares, which were increased by 22% in June of 2022. An April 2023 update by the World Bank states that poverty doubled from 2021 to 2022, pushing an additional 2.5 million people below the poverty line, and that urban poverty rates have tripled from 5% – 15%.
Making ends meet
Our engagement with and research on the working class poor communities in Colombo has revealed a deterioration in their quality of life and coping mechanisms. In the second half of 2021, when the gas and milk powder shortage began to set in, households were still attempting to recover from the loss of income and accumulated arrears and debt from the 2020-2021 lockdown period. During this time, despite food and cooking energy source price fluctuations, these households were still able to put three meals on the table. By mid-2022, families started cutting back on nutritious meals as well as, at times, the number of meals per day.
Today, many families are barely eating (or eating nutritious meals). Food that fills them up easily, cooks fast and/or is cheap are the main considerations. Expenses are competing in an unprecedented way, and what (and sometimes whether) you eat determines if you have money to go to work or school the next day or if instead that money can go towards avoiding disconnection of water or electricity or the loss of a gold chain that has been pawned.
Today we see that children are not sent to school regularly because families cannot afford the transport or additional costs like school shoes, school bags and books. Food is also linked to school attendance; parents say that if their child’s school provides a midday meal, they make sure their child goes to school. However, many families tell us that their children’s school does not have a meal programme and as they are required to send a nutritious meal for their child, there are days where they just cannot send their child to school as there is no food at home. Some days when they do have food at home, they do not have money for the transport to school.
While there are no more long queues in the city for gas cylinders or kerosene, the reality is that availability does not mean affordability. Today, stacks of firewood have become a common sight at low income settlements around Colombo in response to gas and electricity price hikes. Additionally, in many households, stacking is used as a means of avoiding price shocks for fuel sources like gas, which still remains unaffordable for low income households in Colombo. While the use of wood fire stoves and coal stoves is also prevalent among the urban poor, spatial limitations and health considerations make them less preferred sources of cooking.
People have also run out of coping strategies. Totals of accumulated bills, loans and debt are in the six figures; this is money they will never be able to earn or pay back. While the prices are gradually coming down right now, the financial situation of the working class poor communities are so dire that even if everyday costs go back to pre-2020 prices, life will still not go back to normal any time soon.
Electricity and the working class poor
The unfolding effects of the economic crisis are entangled in every aspect of everyday life, often reinforcing each other and digging households deeper into poverty. For working class poor households, everyday life is a constant struggle of making do and balancing competing but essential needs against a diminishing pool of resources. The increase in electricity tariffs in February 2023 by 66%, only a few months after a 75% increase in tariffs in August 2022, is an external shock that affected all low income households.
In the past few years, state authorities such as the Urban Development Authority (UDA) has been weaponising the grid in the UDA-run high rises in Colombo where they shut off the water connection to a flat for non-payment of the monthly housing payment or accumulated electricity bills although they are all different types of services or utilities. In response, there are three coping mechanisms that households generally adopt:
- Some households attempt to lower their electricity consumption.
- Other households continue to shoulder the burden of an increased bill and reduce expenses in other categories.
- There are also those households that will allow for electricity arrears to accumulate until just before or after the point of disconnection.
Welfare benefit payment
The government is currently undertaking an enumeration in order to create a social welfare registry for Sri Lanka. This comes after years of discussion around the inefficiency and targeting issues of the current welfare programmes such as Samurdhi. In 2023, the Welfare Benefits Board (WBB) began an enumeration exercise whereby all those who applied to receive welfare benefits are being scored across a 22 indicator list to determine their eligibility. According to the WBB 3.7 million applications were received to be included in this registry.
The last cash transfer most working class poor families in Colombo received was Rs.5,000, which was given to them during the last COVID-19 lockdown in 2021. We have listed our concerns regarding the Selection of Persons Eligible to Receive Payments Scheme or the Leave No One Behind welfare programme. While we acknowledge the need for an updated social security system that is not politicised, it is unjust to prioritise targeting over wider substantial coverage where more people can be supported as there is no indication of other forms of welfare support, beyond the cash transfers.
- Shifting to a universal social security system instead of a targeted one. Selection of vulnerable households from an expanding pool of households will only cause divisions and tensions at a community level. The government must start putting systems in place to move to a universal social security system that takes into consideration not just impact at a household level but also other aspects that are generally not considered, such as the informal sector.
- The government must prioritise helping as many people as possible instead of selecting only those they consider the worst off, at a time when even the middle class households are feeling the burden of the economic crisis. In the 2023 budget, the government allocated Rs.539 billion for defence and public security while household cash transfers and food relief was allocated Rs.187 billion. The government must increase fiscal allocation for social welfare and reasons for a lack of fiscal space for increasing beneficiaries for social welfare is unacceptable, as we have not seen any reduction in spending on defence or on state events and functions.
- While using a series of criteria to determine a household’s vulnerability or eligibility is a more rigorous approach to selection, the list of indicators used by the WBB penalise people for having worked hard and invested towards a good life. For example, those with a permanently built house, an indoor flush toilet, using over 60 units of electricity a month and cooking using a gas cylinder, have a motorbike or a trishaw, have a safe source of drinking water and main source of lighting is not kerosene receive a score of zero on each indicator. Here we have highlighted some key indicators that would penalise the working class poor communities of Colombo and possibly exclude them from the welfare registry.
- There must also be better communication and transparency regarding the enumeration exercise. Many of those interviewed by Colombo Urban Lab demonstrated a mixed understanding, or had received incorrect information regarding Samurdhi. There has also been no information shared about any grievance redress mechanism or appeals process, whether people can apply to be in this registry in the future should their circumstances change or even any basic information shared about the logic behind the indicators and what next steps people can expect.
Here is a list of immediate term recommendations that have been formulated together with community members as well as studying relief measures elsewhere. One intervention alone will not adequately support urban households and these recommendations are proposed based on the assumption of a variety of interventions being implemented simultaneously.
- Address nutrition, not hunger. Households must be guaranteed a certain amount of rice, pulses, vegetables, fruit, milk and eggs every week for at least one year so that they would be able to meet nutrition requirements irrespective of inflation as well as free up income that can be put towards other expenses.
- Nutrition levels in children can be targeted through school meals programmes. This would ease the burden on the families who have to send food for their children every day to school and would also provide daily access to nutrition the children may otherwise not receive.
- Source and distribute locally. This will ensure that families do not have to travel far to access weekly goods and help local businesses stay afloat while also driving community development.
- Promote sustainable urban gardening. While home gardening may not a viable option for most communities due to built environment in urban settlements in Colombo, there are innovative ways in which households with small spaces can grow certain type of nutritious food in a small space such as spinach, tomato and chillies if such methods and tools can be made accessible to them.
- Adjust the food plate. At a time where the concept of a nutritious diet seems almost impossible when people are struggling to even eat a meal a day, targeted information and communication campaigns can better help households to identify meals that are low in cost, high in nutrition and how they can be sourced locally.
- Provide monthly cash transfers. Households have needs that go beyond food expenditure, for which they require cash in hand. We recommend a minimum of Rs.25,000 per household per month in the form of cash transfers for these non-food expenditures.
- Cancel or restructure defaults on utility bills. We recommend analysing the various debt to the state across the various settlements in Colombo and moving towards cancelling the arrears or findings other ways of making those payments, for example, a long term repayment plan for amounts accumulated so far.
- Do not increase the burden on women. Over the last two years we have seen women shoulder the additional burdens of the crisis from finding ways to put food on the table to handwriting children’s homework sheets when they cannot afford print outs. School meal programmes, community gardens and community kitchens that rely heavily on the unpaid labour of women must encourage to factor in budgets for the time these women put in for such work.
- Provide free public transport for school children. We recommend free public transportation for school going children or dedicated school transportation that is free of charge in order to ensure children go to school regularly and reduce the non-food expenditure burden on low income households.
- Prioritise a just recovery. While support for communities to recover from the impact of the crisis in the immediate future is necessary, the government must also plan and budget for addressing the long term recovery. These include more budgetary allocations to the health, education and social welfare sectors, supporting livelihoods (formal and informal) of communities and connecting them with access to finance, markets, new skills and vocations.
Read the full policy brief Breaking Point: Impact of Sri Lanka’s Economic Crisis on Colombo’s Working Class Poor here.