Sri Lanka resorting to 'supreme idiocy' of price controls: Razeen Sally
Aug 02, 2016 12:08 PM GMT+0530 | 0 Comment(s)
POLICY GAP: Economist Razeen Sally speaking at Sri Lanka Economic Summit 2016. Also in the panel are President Maithripala Sirisena and Finance Minister Ravi Karunanayake.
ECONOMYNEXT - Sri Lanka's economic policy has deteriorated to the 'supreme idiocy' of resorting to price controls after generating inflation through loose macro-economic policies, a top economist said.
"There has been the supreme idiocy of imposing price controls, which I thought was something we had left behind in 1977," Razeen Sally, Chairman of Sri Lanka's Institute of Policy Studies and a professor at Singapore National University said.
"The government by creating inflation and by having import protection puts burdens on consumers and then puts burdens on producers and entrepreneurs with price controls."
He said the moves were market 'busting' rather than market facilitating. Price controls were imposed in the first budget of the current administration and the new ones have been imposed recently he said.
Price controls, when rigorously imposed, create shortages and black market, which were widespread before 1977.
Ironically consumers have been asked to dial 1977 to complain to activate enforcers who are supposed to police the price controls under an agency coming under Sri Lanka's Trade Ministry.
During 1977, the government resorted to heavy money printing generating foreign exchange shortages, leading to price controls, rationing and draconian exchange controls were used to stop the currency from collapsing from the excess demand from loose policy.
Sally said following too bad budget which increased spending, the central bank policy was too loose.
He said the newly appointed central bank Governor Indrajit Coomaraswamy had understood that the role of the central bank was to crate economic stability. (Colombo/Aug02/2016)