ECONOMYNEXT- Sri Lanka will make state interventions in the pricing of cement, steel and aluminium products instead of waiting the market to bring down prices, as the rupee appreciated, State Minister of Finance Ranjith Siyambalapitiya has said.
The threat of new price controls come as Sri Lanka’s rupee started to appreciate after the central bank stopped anti-market suppression of interest rates through money printing by allowing market rates to move up from April 2022 and lifted another state control involving a surrender rule in March 2023.
Global commodity prices have also started to reduce after the US Fed hiked policy rates from March 2022 and started to withdraw excess printed money from circulation (reversing quantitative easing) allowing market rates to move up.
“World market prices of many items have fallen and the benefit of rupee appreciation has to be given to the construction sector,” Minister Siyambalapitiya was quoted as saying at a discussion at the Finance Ministry.
“Instead of allowing for the open market to bring down prices, interventions should be made.
“After observing prices, the exact percentage that prices should fall will be informed.”
Siyambalapitiya had said that while prices go up fast, they do not come down fast enough.
Construction steel prices in particular are artificially high in Sri Lanka due to existing state interventions involving protectionist import duties to give high profits to an oligopoly of producers, which has blocked market forces, critics say.
Imports of cement however is freer allowing prices to fall. Sri Lanka’s Consumer Affairs Authority has previously imposed price controls on cement, and triggered shortages sometimes bringing the construction industry to a halt.
But no price controls have been imposed on steel, which have protective tariffs.
Among the participants at the discussion was the Consumer Affairs Authority, the statement said.
The CAA has already disrupted the poultry sector and closed layer chicken farms with price controls.
Price and other controls lead to corruption, Singapore’s s former Finance Minister Goh Keng Swee told President J R Jayewardene.
in a report in 2980 he praised the removal of economic controls led “to an end to shortages, queues, black-markets with their corrosive effect on personal integrity.”
When Singapore was taken back from Japanese rule the controlled imposed during money printing remained. And Singaporeans referred to the British Military Administration that took over as the Black Market Administration. (Colombo/May31/2023)