High inflation and cost of living stemming from ongoing economic crisis have dampened Christmas celebrations

(UCAN) For Nirmala Fernando, this year’s Christmas is quite different from the chaotic previous year, when millions in Sri Lanka stood in kilometers-long lines to buy essential goods such as cooking gas, milk powder, and fuel.  

“There was an acute shortage last year. But this year, we have little money and everything is expensive. We cannot buy much,”  the mother of two told UCA News as she did her Christmas shopping in Pettah, a market area in Colombo.

Every year, the family used to invite their relatives for Christmas dinner, but not this year considering the expenses. Her husband, a contractor in the construction industry, is the breadwinner of the family along with her in-laws.

“We limited our Christmas shopping with some gifts for the kids and other essential goods. We fear prices will go up further in January next year with more taxes,” she said.

Like Fernando, for thousands of Catholic families, this year’s Christmas is a low-key affair due to ongoing economic hardships.

After the country declared bankruptcy on its foreign loans last April, the government of President Ranil Wickremesinghe decided to go for an International Monetary Fund (IMF) bailout package.

His predecessor Gotabaya Rajapaksa was forced to flee the country in July 2022 following nationwide protests after an unprecedented economic crisis hit the country since 2019.

The crisis continues with high inflation and a near depletion of foreign exchange reserves, making essential commodities expensive.As part of the US$ 2.7 billion IMF bailout package, the second tranche of US$ 337 million, was approved on Dec. 14.

Just hours before the approval, the Sri Lankan Parliament approved the annual budget by majority votes, which included a tax hike from 15 percent to 18 percent on goods, and scrapped tax amnesty given to all other products as required by IMF to increase local revenues.

The new tax scheme which includes tax on locally manufactured products will come into effect from January 1. Many fear that the prices of goods, particularly imported items will go further up once the new taxes come into effect.

At the bustling retail market of Pettah in Colombo where it used to glow with seasonal decorations and Christmas trees throughout the city in the past, the festival mood is slow to pick up despite government initiatives to promote the tourism industry.

People are slow to spend because of unprecedented price hikes, higher taxes, and fluctuating inflation, business owners say.

“Not many people are buying Christmas or seasonal goods these days compared to previous years. People don’t have extra money on their hands. They prioritize buying essential items,” said S. Manoharan, a retail businessman in Pettah.

He sells Christmas trees, decoration balls, fairy lights, and Santa hats The price of onions spiked to a staggering 550 rupees (US$1.71) per kilogram after the tax hike was announced, he pointed out.

Local media reports suggest that even eggs are short of supplies during the Christmas and New Year holidays, prompting the government to place an import order of 15 million eggs from India.Sri Lanka’s poultry industry collapsed last year. The price of one piece of egg climbed to 65 rupees in recent weeks.

The price hike of ingredients has pushed up the price of cakes. Many families are unable to afford butter and chocolate cakes during this festive season which are now being sold at 1,350 rupees per kilogram.

A Christmas wreath is sold for around 700 rupees and starting prices of plastic-made two-feet Christmas trees are at 8,000 rupees.

“Considering the unaffordability of the people, we have introduced discounts for some of the decoration items for up to twenty percent, but we don’t see much enthusiasm among the public in buying them,” Manoharan said.

“Many do visit the shops but leave after inquiring about prices,” he lamented.

In the Tamil minority heartland of northern Sri Lanka, the Christmas mood has not yet picked up due to heavy rain and flooding across the region in the past few days.

Many affected families, who took shelter in temporary evacuation centers and at the homes of relatives, have not returned home yet.

The severe economic hardships due to the increased tax burden and cost of living explain why many people are planning to celebrate Christmas and New Year modestly, said Father Anthonypillai Gnanapragasam, the administrator of the popular Our Lady of Madhu Catholic shrine in Mannar, Northern Province.

“Whatever the difficulties they find themselves in, as Jesus Christ showed to us to be fulfilled and hopeful during these difficult times. I believe people will mark the season with simple joy and be kind to each other more,” Gnanapragasam told UCA News.

“After all, the difficulties and hardships are not something new for folks here as they lived through the war period and came out of it with the support of their religious faith. I hope they will come out from the current economic challenges too soon,” he said.