ECONOMYNEXT – Sri Lanka’s ruling administration is now seeing virtues of a fuel price formula which was mocked during the last administration a minister said as the country faced forex troubles after money printing and global commodity prices also rose amid loose US policy.
Sri Lanka introduced a fuel price formula after the 2000/2001 balance of payments crisis, but Sri Lanka’s Marxist Janatha Vimukthi Peramuna slammed the policy at the time.
Current Minister Wimal Weerawansa, then in the JVP called it a ‘World Bank plug’ and it was embraced by the ‘Rata Perata’ framework of President Mahinda Rajapaksa.
Mangala Samaraweera, who re-introduced the formula during the ousted Yahapalana administration was also a part of that administration.
“When Mangala Samaraweera was talking about the price formula in the past, we also sitting in the opposition sometimes mocked and disparaged it (uper-har-suyer-ter aper-har-suyer-ter),” co-cabinet Minister Dallas Alahapperma said frankly responding to a reporters Tuesday.
“As you suggest at this moment if there was a price formula, if the prices fluctuate, when it goes up or down the benefits go to both sides is not a secret.
He said Petroleum Minister Udaya Gammanpila had also proposed a formula.
“The subject minister Gammanpila has raise the same matter as you – the need for a price formula,” he said.
“The important matter it is not whether it was there in the past or not. But what is more practical one.”
The current Sri Lanka Podujana Party came to power slamming the price formula and promising a price stabilization mechanism to fix fuel prices.
Minister Allahapperuma said it was necessary to see how fuel prices affected broader sections of the population.
The government will look at how to help the weaker sections, he said.
Market pricing fuel reduces disposable incomes of fuel users reducing savings (and credit) or consumption, crowding out non-oil imports in the absence of money printing, keeping the external sector balanced and the exchange rate stable.
Poorer people spend most of their money on foods, but energy use go up with affluence. The largest fuel and energy users in all countries are the richer segments and businesses, especially export firms, which sell goods to customer in rich countries.
Sri Lanka is now facing severe external troubles after years of state expansion with unemployed graduates, another policy championed by the JVP and embraced by almost all parties.
Loss making state enterprises, including privatized firms that were re-taken to the state are adding to the troubles. (Colombo/Dec22/2021)