Business
Excessive price controls will worsen shortages
New measures treating the symptoms rather than the disease
Harsh enforcement of price controls may worsen food shortages.
The Commissioner of Essential Services has been granted the power to seize food stocks held by traders and retailers and regulate prices.
There is serious concern with the steep rise in the price of essentials which has taken place over the past two years. Advocata’s Bath Curry Indicator (BCI), which tracks commonly consumed items, shows a 30% increase in retail food prices in August 2021 compared to August 2020.
The reasons for the increase in prices include import restrictions and tariffs that have disrupted markets. The classic example is turmeric that retailed at Rs.650 per kg prior to the import ban but now retails at Rs 3500 per kg according to the DCS and at around Rs 4400 to Rs6900 on online retailers . Other products are similarly affected.
The recent ban on fertiliser is likely to result in even further increases in the prices of vegetables and cereals over the forthcoming harvests. These restrictive policies have been compounded by the acute shortage of foreign currency caused by the on-going balance of payments (BOP) crisis. Lack of foreign exchange has imposed additional restrictions on imports resulting in shortages causing prices to spike.
While the increases in prices is a real concern, the causes are complex and are largely due to poor policies.
The balance of payments crisis arises not due to trade policy but due to the levels of aggregate demand in the economy, principally through consumption and investment influenced by the prevailing fiscal and monetary policy. The tax cuts towards the end of 2019, fiscal dominance of monetary policy and non-pass through of global commodity prices through price controls and administered prices have contributed towards excess import demand.
This is evident in the trade data: despite the stringent import restrictions imposed after April 2020, import demand for the six months to June 2021 have surged by 30% over the same period in 2020. While exports in the period have also risen, it is the rapid rise in imports that have caused the negative trade balance.
Price controls and administered prices have led to shortages and hoarding.
Instead of addressing the problem at the root, the government is trying to control the symptoms. Previous attempts at price controls have not succeeded as Advocata’s research in 2018 has shown but better enforcement is not the solution. Instead, the Government should address the policy weaknesses that are the cause of the problem.
Trying to negate policy missteps in fiscal and monetary policy through trade policy in an untenable exercise for it impacts economic efficiency hence growth and productivity and also leads to issues with economic distribution.
Harsh enforcement of price controls could in turn create black markets resulting in significant welfare losses in the form of a deterioration in product quality, elevate scarcities, disadvantaging the poor who are less sophisticated and in the long run lead to higher prices, lower output due to lower investment.
We urge policy makers to urgently address the root cause of the current crisis by increasing tax revenues via more progressive tax policies – by increasing the tax base for both direct and indirect taxes and reducing the tax gap through greater tax effort. Further, it is best where possible to use well targeted cash transfers to vulnerable segments of the population to improve affordability instead of cutting taxing, imposing price control or using administered prices on utilities.
Key Points
Advocata Institute highlights the negative effects of harsh price controls.
The root causes of the present crisis lies in loose monetary and fiscal policies compounded by import controls and exchange control restrictions. Therefore restoring macroeconomic stability is a priority.
Cash transfers to vulnerable segments is a better mechanism to implement distributive policies rather than intervening in market prices through tax subsidies, price controls or administered prices.
Advocata is an independent policy think tank based in Colombo, Sri Lanka. We conduct research, provide commentary and hold events to promote sound policy ideas compatible with a free society in Sri Lanka. Visit advocata.org for more information.
Business
DevPro and WCIC come together to accelerate women’s economic empowerment in Sri Lanka
DevPro and Women’s Chamber of Industry and Commerce (WCIC) signed a formal partnership on Wednesday, 28th January to collaborate in promoting women’s economic empowerment and inclusion in Sri Lanka.
DevPro builds on 30 years of OXFAMs legacy in Sri Lanka and works towards Inclusive Economic Development leveraging expertise in inclusive and climate-resilient market systems and enterprise development and innovation. DevPro’s work is guided by the core values of gender justice, inclusivity and community-led development. Through its recent projects, DevPro has supported over 270 women-led MSMEs, across agriculture, handloom, and tourism-related value chains in five provinces in Sri Lanka through a mix of interventions combining skills development, enterprise strengthening, market linkages, and gender-sensitive community engagement to improve income, resilience, and economic participation.
WCIC is the first women-only trade chamber in the world, dedicated to empowering women entrepreneurs and women-led MSMEs in Sri Lanka through skills-building, business advisory services, networking etc. Among its many initiatives, WCIC’s flagship annual event, “Prathibhabhisheka” – Women’s Entrepreneurs Awards has empowered many women owned and women-led businesses in Sri Lanka to enhance their business resilience and competitiveness through improved governance processes, financial health, market recognition and global expansion.
Through this partnership, both DevPro and WCIC, will leverage their collective expertise, networks and resources to advance women’s economic empowerment and inclusion through projects, capacity building, research and policy advocacy focused on women entrepreneurship development, innovative business models, sustainability certification and credentials, export readiness and market integration and financial literacy and inclusion.
The MoU was signed by Gayani de Alwis, Chairperson of WCIC and Chamindry Saparamadu, Executive Director of DevPro in the presence of senior members of both teams.
Business
Writer Business Services enters Sri Lanka to partner with institutions to provide information management and payments solutions
Writer Corporation, one of India’s leading business groups, announced the launch of its subsidiary, Writer Business Services Pvt. Ltd., and the commencement of its operations in Sri Lanka. The expansion reflects Sri Lanka’s strategic importance in Writer’s regional growth plans and its role in supporting a highly regulated digital and financial services market which is currently undergoing digital transformation.
Sri Lanka’s continued focus on strengthening regulatory frameworks, digital platforms, and financial systems is shaping how institutions across banking, government, and enterprise sectors approach their business operations. There is a clear emphasis on secure, compliant, and resilient information and transaction environments that can scale with regulatory and business needs. Writer’s entry into Sri Lanka aligns with this direction, bringing global experience and a partnership-led approach to the market.
As part of its launch, Writer will establish a secure records and information storage facility in Seeduwa, Colombo. Designed to meet global standards for security, compliance, and disaster resilience, the facility will support banks, financial institutions, government bodies, and large enterprises in managing physical and digital information across its lifecycle.
Alongside information management, Writer brings established expertise in integrated payment services to support the modernization of transaction infrastructure across the banking and financial services sector. Its payments capabilities focus on strengthening availability, transaction continuity, and transparency across critical payment channels that underpin institutional reliability and customer confidence.
Writer’s digital payments offerings in Sri Lanka include end-to-end ATM and self-service terminal outsourcing, integrated channel ownership and managed services, field management applications, payment and reconciliation platforms, and remote monitoring with near real-time reporting. These solutions support financial institutions in improving uptime, strengthening governance, and enhancing operational efficiency across payment networks, in line with the continued evolution of electronic and automated payment systems.
Across information management and payments, Writer operates with an integrated portfolio spanning records and information management, business process outsourcing, cloud and digital services, data privacy, cybersecurity and enterprise payments infrastructure. These capabilities support institutions in addressing evolving regulatory requirements, digitization of legacy environments, and rising operational and cyber risks.
Writer’s local presence enables closer collaboration with clients and on-ground delivery, while supporting the development of Centres of Excellence across cybersecurity operations, SOC and NOC services, AI-led solutions, and payments operations and monitoring.
Writer’s Sri Lanka operations will be built, led, and run by Sri Lankan professionals, reflecting a long-term commitment to local talent growth and development.
Commenting on this development, Satyamohan Yanambaka, CEO, Writer Global Services Pvt. Ltd., assured Writer’s long-term commitment to the country’s digital ambitions. He said, “Writer’s entry into Sri Lanka reflects our belief that digital ambition in regulated environments must be supported by trust, sound governance, and strong execution. As institutions scale digital services, the reliability of information and payment systems, channel operations, and governance frameworks becomes increasingly important to public and institutional confidence. Our experience across information management, digital transformation, and enterprise payments enables us to support secure, large-scale financial ecosystems, with a clear commitment to building and leading these capabilities locally.”
Sri Lanka’s Digital Personal Data Protection framework raises expectations around how personal and sensitive information is secured and governed.
Business
Altair issues over 100+ title deeds post-ownership change
Altair Residences have, over the past six months, seen more than 100 individual title deeds being executed by apartment owners, providing owners with a clear, registered, legal title to their apartments in accordance with Sri Lankan property law. This has been a key initiative by the new owners and management of Altair to improve governance and will continue in an orderly manner in the coming months.
With the transition of ownership to Blackstone India, Altair’s Management Council has also been formally constituted, enabling owners to play an active and proactive role in the management of the Altair building. In addition, the management council has appointed Realty Management Services (RMS), a subsidiary of Overseas Realty Ceylon PLC, as the new facility manager of Altair.
Commenting on these milestones, Thilan Wijesinghe, Chairman of TWC Holdings, who, together with a team from TWC, represents Blackstone’s interests in Sri Lanka, said, “The issuance of individual title deeds is a critical step in any professionally developed residential asset. Over the past six months, this process at Altair has moved forward in a structured and transparent manner, alongside the formal establishment of owner-led governance. This, combined with the appointment of experienced facility managers are fundamental building block for long-term value-creation for apartment owners and proper asset stewardship.”
With ongoing improvements to the building being undertaken by Indocean Developers Pvt Ltd (IDPL), the owning company of Altair, the issuance of deeds to owners is expected to accelerate over the coming months.
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