ECONOMYNEXT – Sri Lanka’s Attorney General has submitted a price formula for liquefied petroleum gas to court for approval to end ministerial discretion and bring back evidence based decision making, Economic Reforms and Public Distribution Minister Harsha de Silva said.
The price formula was developed by a newly set up analytics unit at the ministry.
Though called an open economy, Sri Lanka still controls prices of some goods.
In Sri Lanka prices usually go up and do not come down as the central bank prints money and depreciates the currency permanently, bringing economic hardship and political instability to the country, unlike high performing countries in East Asia.
"In my view all prices should be market determined," Minister de Silva said. "Why does the minister have to determine the price? But where there are price controls for whatever reason, we have to use evidence."
The price formula for LP Gas has been submitted to Supreme Court for approval.
Sri Lanka’s Supreme Court mandated a price formula for LP Gas following a court action several years ago but after the current administration came to power in 2015 along with a populist budget by then-Finance Minister Ravi Karunayake, the price formula was effectively abandoned.
Both the state-run Litro Gas and privately owned Laugfs making losses later when oil prices bounced and the central bank depreciated the currency after its domestic operations department printed money, de-stabilizing a pegged monetary system, critics have said.
The rupee fell from 153 to 182 to the US dollar in 2018. It bounced back to 176 to the US dollar in 2019 as credit weakened. But the domestic operations department had started injecting money in to the banking system again.
There have been calls to reform the central bank and criminalize certain reckless actions of the domestic operations department, including floating with excess liquidity. (Colombo/Aug16/2019)