Essential goods price hike: 'Price formula is another way for Govt to interfere with businesses' (Video)

Expressing their view regarding the prevailing situation over the price increases of multiple essential goods, the Advocata Institute stated that the public has to brace themselves for a 'rocky' next months due to necessary hard economic reforms.

Joining the conversation with Hiru News, on behalf of the Advocata Institute, which is a Colombo-based independent public policy think tank, Research Analyst Sathya Karunarathne commented on the multiple price hikes imposed in the market within the past week as well as the possible long-term solution that could be introduced.

She noted that the "pro-poor" solution for this issue lies in opening up the market for competition and allowing market forces to determine prices, not only for essential items but also for their alternatives and substitutes.

Karunarathne further pointed out that in terms so of prices and ensuring that a price is given to the consumers, one of the most popular solutions that many governments around the world have resorted to is a price formula. Explaining further, she added that although a price formula may be a somewhat better solution than price control, tit is not the most sustainable, viable long-term solution.

The price formula is another way that the Government interferes with the businesses, just as done when imposing a control price. Karunarathne commented that there is a need to allow the market to function on its own.

Expressing her views, she noted that Sri Lanka is at a very crucial juncture where we need to take hard economic reforms very seriously. She added that when speaking of hard economic reforms, relevant authorities must conduct a dialogue over the Government expenditure.

"We all know that State-owned enterprises are making huge losses, so the question really boils down to where are you going to pump your money? Are you going to pump it to these loss-making entities continuously, or are you going to look at social safety nets?"

Furthermore, she also commented on the possibility of increasing wages as the prices of essential commodities are increasing.