Govt. imposes price controls on 16 essential items

In a possible interpretation of the social market economic model with which the current government came into power, the populist price controls proposed in the budget were implemented yesterday, with several price controls introduced in the interim budget being continued.

The controlled prices quoted in the 2016 Budget last November saw even further reduction in prices when the gazette was published yesterday. However, price of one kilogramme (kg) of chickpeas (gram) saw the price ceiling of Rs.169 proposed in the 2016 Budget converted to a price floor of Rs.260. The budget noted that the price of imported chickpeas was Rs.160 per kg, compared to a market price of Rs.220.

The German social market economic model advocates a free and open intensively competitive market for both suppliers and consumers, while providing social protection through welfare only for social segments such as the elderly, unemployed and disabled. Welfare is provided to a large minority of society. Most of the price-controlled goods are consumed by most of the public, financed by the subsidies provided to the suppliers.

These goods will not be subjected to the value-added tax, which will be increased from 11 percent to 15 percent for other goods this month, with the parliamentary approval, effective retrospectively from May 2.

Sri Lanka recently subscribed to a US $ 1.5 billion three-year International Monetary Fund (IMF) loan to repair its balance of payments. The programme’s continuance is dependent on strict fiscal policy discipline. However, inflation targeting the goals of the IMF programme reached dangerous levels last month, which may be an added motivation for the price controls at the cost of overall fiscal health and implementing a social market economy.