Removal of price controls should have come as part of overall reform package: Prof. Abeyratne

By Nishel Fernando 
While some have welcomed the recent removal of price controls on selected essential goods in an attempt to address supply shortages, a top economist pointed out that low income earners are impacted disproportionately by the price adjustments as the government decided to remove price controls in an ‘ad-hoc and piecemeal manner’ instead of implementing it as part of an overall reform package.

“You might think that eliminating price controls is a good thing we have done and we can feel good about it. No, I don’t say that. The reason is that if you select things in an ad-hoc and piecemeal manner, it’s not going to work either way. If this had come as part of an overall reform package, I would have been happy.

 Because it didn’t come that way, obliviously, the negative implications of the removal of price controls are going to hit hard on low income groups,” Professor in Economics at the University of Colombo, Sirimal Abeyratne told a pre-budget discussion organised by NextGenSL, in partnership with Friedrich Naumann Foundation for Freedom in Colombo last Thursday.

The government recently removed the control prices imposed on LP gas, milk powder, rice, wheat flour and cement, after wide shortage of these goods in the market.

Prof. Abeyratne suggested that such a reform package is vital to stabilise price levels while enhancing incomes of people.

Meanwhile, he noted that price controls or administrated prices have never been successful in solving key economic issues including maintaining stable prices without shortages and poverty alleviation in the country.
“…it has never solved a supply shortage, but it has eliminated the quality goods from the market and it has also created a black market for quality good. It has done so little in solving out basic economic problems in this country,” he said.

Similarly, Prof. Abeyratne also pointed out that import control measures Sri Lanka has imposed from time-to-time, in the sake of supporting and encouraging local production, have never succeeded in achieving their purpose. 
Therefore, he stressed that the government must look at the overall economic policy, in order to create an overall conducive environment to enable all business owners to flourish and nurture their businesses, instead of resorting to import control measures.