15% food price increase in a single month

Originally appeared in the Daily FT

Advocata’s  Bath Curry Indicator (BCI) , which tracks the monthly changes in the retail price of food, recorded an increase of 15% from November 2021 to December 2021. 

Much of this increase is driven by rising prices of vegetables. 100g of Green Chillies at Rs18 increased to Rs 71. This is a 287% increase in just one month. Similarly, prices of Brinjals have increased by 51%, red onions by 40% and beans and tomatoes by 10%. 

Overall, since 2019, prices have almost doubled, and compared to December 2020, prices have increased by 37%. 

This means that an average family of four, who spent  Rs. 1165  weekly on the BCI basket of food items in December 2020 now has to pay Rs 1593 for the same basket of goods just 1 year later. 

The BCI tracks the weekly retail prices in the Colombo market of the most commonly consumed food ingredients that might be used in a typical Buth curry meal. The prices are collected from the “Weekly Indicators” that the Central Bank publishes. 

  The BCI Indicator can be accessed at www.bci.advocata.org.

A tribute to Linda Whetstone from Sri Lanka

On December 15, 2021, in the midst of those who loved her and all those who she loved back, Linda Whetstone left this world at the epicenter of the institution that her later father, Sir Antony Fisher founded, The Atlas Network.

Linda was a beacon of light to all those who believed in freedom and human dignity. She was a generous donor and an advisor to think tanks and liberals around the world. 

The Advocata Institute bears testimony to the support and strength she gave to Sri Lankans to stand against the crude shadow of populist nationalism that had overwhelmed the fabric of social life in our country.  Before the founding of Advocata, liberal ideas around economics were held by a few scattered individuals and lacked an organized and coherent voice.  Our partnership with Atlas Network, which Linda Whetstone chaired at the time,  was pivotal in making us effective communicators and advocates of these ideas in Sri Lanka.
 
The team at Advocata remembers fondly Linda’s strong encouragement, belief and trust in us as a young organization to host the 2019 Asia Liberty Forum held in Colombo. One of the youngest think tanks in the Atlas network to host a major event.  Dear Linda, you were one of the cornerstones at the Atlas Network that had the confidence that we could pull it off. 

During the 2019 Asia Liberty Forum,  Linda personally sponsored half a dozen young people to attend the conference. Over the years with her support, Advocata Institute and The NightWatchman Society has been able to translate books about basic economic ideas to help expand the knowledge of young people and decision makers, a cause she believed in firmly. 

Linda Whetstone also has the unique distinction of serving as the  President of the Mont Pelerin Society and also as a board member and adviser of the Institute of Economic Affairs and Students for Liberty as well as numerous other organizations.  

The world of free market thinkers has lost a champion of liberty.  Linda will be fondly remembered by all those who were inspired, encouraged and influenced and who were fortunate enough to have been associated with her in life.

We will miss her infectious energy, her support and friendship. 

The founding members of the Advocata Institute


Time to bring SOE privatisation to the policy table

Originally appeared on Daily FT, Ada derana Biz , Sunday Observer and The Sunday Island

Privatisation is the need of the hour.

  • Sri Lanka is already in one of the worst economic crises in its history. Experts warn that deep economic reforms are essential. 

  • Reforming SOE's can  curb further losses,  which add to the fiscal deficit. 

  • The  Cumulative losses of the 55 SOEs from 2006-2020 is a staggering 1.2 trillion.  

  • Disposing of State Owned Enterprises which are a burden on the public finances, is the crucial need of the hour. 

  • Immediate privatisation of  large  State Owned Enterprises,  will  build international investor confidence. 

Big, ponderous, Government enterprises are not responsive to our needs. And because they’re not responsive, you will go home today and you will have a blackout of one hour, because they’re load shedding during peak hours,” said Prof. Rohan Samarajiva, a veteran policy expert and an advisor of the Advocata Institute.

He made these comments at Advocata’s press briefing, organised to highlight the urgency of carrying out reforms to State Owned Enterprises (SOE). “The basic issue is that we, in this country, are suffering from a twin deficit. We need to get started on addressing the core problem,” further stressed Prof. Rohan Samarajiva.

According to Prof. Samarajiva, privatising a globally visible, yet loss-making SOE, such as SriLankan Airlines is the best solution to create confidence among investors that Sri Lanka is serious about reforms.

Sri Lanka’s SOEs are a serious burden on public finances. With the economic crisis reaching a tipping point, it is becoming increasingly impossible to keep these loss-making enterprises afloat. The continuation to do so, at the expense of the taxpayer, can have serious consequences to the economic trajectory of the nation.

Advocata Institute’s research team has identified that the cumulative losses of the 55 SOEs from 2006-2020 is a staggering Rs. 1.2 trillion. The combined loss per day of the Ceylon Petroleum Corporation, the Ceylon Electricity Board, SriLankan Airlines, Sathosa and the National Water Supply and Drainage Board is approximately Rs. 384,479,189, according to data for the year 2019.

This is at the backdrop where the country is wading through a serious debt crisis with questions surrounding the ability to meet forthcoming debt obligations. The briefing brought together a panel of industry experts who raised alarm bells on why Sri Lanka cannot afford to be complacent about SOE reforms anymore.

Prof. Rohan Samarajiva further explained the seriousness of this issue along with how privatisation can achieve positive outcomes for the country. “In 1997, Sri Lanka Telecom was making losses and providing bad services. Today, after privatisation, it is providing us with good services and employment and double of what they were earning. It is also providing the Government with a dividend which generated billions to the Government.” He highlighted that the country has no other alternative to prevent the haemorrhaging losses of SOE apart from privatisation.

“Privatisation is not a one-size-fits-all model. It is different in different countries and sectors, as seen in the telecommunication industry in Sri Lanka. With a good regulator we can have competition, leading to greater efficiency and making technology accessible to the common public,” commented Advisor to the Advocata Institute Anarkali Moonesinghe.

She further elaborated that possible avenues for privatisation that can be considered include the listing of SOEs in the stock exchange. According to Moonesinghe: “Our stock market could use large capital companies that are owned by the Government today.

“It not only gives people ownership but also broadens ownership by giving the average person an opportunity to become a direct stakeholder to these enterprises. This can be a better option than attaching the person through taxpayer money or having your EPF/ETF being taken into these enterprises,” thereby describing the merits of listing.

Advocata Academic Chair Dr. Sarath Rajaptirana said that the present crisis makes two choices available to the country, which is “reform or perish”. He highlighted the urgency of implementing structural reforms.

He further commented that the key issue with SOEs lies in productivity. “For over 30 years, Sri Lanka’s total factor productivity was less than 1%. This is in severe contrast to countries such as South Korea and Vietnam, where a jump in productivity is experienced today which we were never able to maintain. If you want permanent change in the GDP rate, you need to have productivity increase,” said Dr. Rajaptirana.

The recording of the media event can be found at advocata.org.

Media coverage on "Urgency of State Owned Enterprise Reforms"

Why does Sri Lanka need a national airline when india doesnt have one? Prof. Rohan Samarajiva

Amidst a whopping amount of losses national carrier SriLankan Airlines has been making for years, LIRNEasia Founding Chair and Advocata Institute Advisor Prof. Rohan Samarajiva questioned why Sri Lanka would need a national carrier when India, the neighbour, does not have one. 

During a press briefing organised by Advocata Institute on “The Urgency of State Owned Enterprise Reforms”, Prof. Samarajiva stated that SriLankan Airlines should be privatised to not only save public money, but to also improve the credibility of the country by showing the country’s creditors that Sri Lanka is genuinely committed to meeting its debt payments. 

Prof. Samarajiva pointed to the fact that Sri Lankan is hemorrhaging around Rs. 47 billion in losses per annum and questioned the rationality of using public funds collected through commodity taxes from a person who has never even gone near the airport. 

Read the full article here

Broad SOE reforms urged for SL to regain confidence of external creditors

With the government’s current approach appearing to be failing in its ability to meet upcoming external debt servicing commitments, the Colombo-based policy think tank Advocata Institute urged the government to roll out a broad reform package targeting ‘strategically important’ State-Owned Enterprises (SOEs) as a way to regain confidence of the country’s external creditors, illustrating the determination to resolve the prolonged structural issues in the economy.

According to data presented by Advocata, the cumulative losses incurred by key SOEs were estimated at Rs.1.2 trillion during 2006-2020, while the total SOE debt reached to 9 percent of GDP in 2020. The top five SOEs alone incurred an estimated Rs.384.48 million loss per day burdening both State coffers and ultimately the taxpayer.

“Sri Lanka lacks credibility in its approach to the creditor. In the current context, it’s not possible for us to increase revenue. Therefore, what we have to focus is on cutting expenses. This will send a strong message of responsibility and of commitment to anyone who has given us loans and they will say, ‘this is the country we should negotiate with, because they are serious about their economic problems’,” LIRNEasia Founding Chair and Advocata Institute Advisor Prof. Rohan Samarajiva said.

Read the full article here

State-Owned Enterprise losses mount to staggering Rs 1.2 trillion

The 55 “Strategically Important” listed State-Owned Enterprises (SOE) snowballing losses from 2006 to 2020 is a staggering Rs. 1.2 trillion. Out of the 527 state-owned enterprises the Treasury has classified 55 as “Strategically Important” it was revealed at an Advocata Institute that organised an event on “The Urgency of State-Owned Enterprise Reforms” last week.

Sri Lanka’s State-Owned Enterprises have placed a significant burden on public finances. They are also a major source of inefficiency in the economy. “Therefore the present economic crisis, along with Sri Lanka’s current debt crisis, makes reforms on SOE’s a national priority to emerge from present economic challenges,” it was opined at the event.

Read the full article here

Advocata's event on the Urgency | News 1st: Prime Time English News | (09/12/2021)

Advocata's event on the need for the “Urgency of State Owned Enterprise Reforms” featured on Newsfirst Prime Time English News

"Urgency of State Owned Enterprise Reforms"

The Advocata Institute hosted a press brief on the '"Urgency of State Owned Enterprise Reforms" with Advocata’s Academic Chair Dr. Sarath Rajapatirana, Advocata’s Advisors Professor Rohan Samarajiva and Ms. Anarkali Moonesinghe on December 09th at 2.00PM.

The event commenced with a 10-min presentation, analysing the performance of key State Owned Enterprises. Followed by statements made by Dr. Sarath Rajapatirana, Professor Rohan Samarajiva and Anarkali Moonesinghe on the need for SOE reforms, before opening the floor for a question and answer session with journalists and media.

The event was moderated by K D Vimanga and Sathya Karunarathne.

The presentation by KD Vimanga on "Urgency of State Owned Enterprise Reforms" can be accessed below.

Urgency of State Owned Enterprise Reforms Presentation

Watch the discussion on Advocata Institutes YouTube channel. 

Media coverage on " A National Consensus for the Economy"

Privatise SriLankan - Prof. Samarajiwa

The Government should privatise national carrier SriLankan Airlines and save millions of rupees that is being daily wasted to keep the airline, said founding Chair of LIRNEasia, Prof. Rohan Samarajiwa at the Advocata Institute organized building political consensus for economic reforms event at BMICH on Wednesday.

He said that if the Indian government can privatise their national carrier Air India, the Sri Lanka government too could do it. He however said that like what the Indian government did the Sri Lankan government too would have to shoulder their burden of settling all the debt owed by the airline when it was privatised. “However even after doing this the Sri Lanka government would be able to save millions of rupees that is allocated to ‘up keep’ the airline.

Read the full article here


‘IMF bailout viable option for mounting debt repayment’

Whichever government is in power they would have to face the current dollar crunch, escalating global commodity prices, pandemic and most of the other current issues and one way out of this is to look for a IMF funding Chair of LIRNEasia, Prof. Rohan Samarajiwa at The Advocata Institute organized building political consensus for economic reforms event at BMICH on Wednesday.

He said that no institution has given loans to Sri Lanka by force but now the debt repayment is mounting and one viable option would be to look at the IMF for a bailout. He also said that the budget did have salient features and though not adequate to cut down the fuel allowance of the parliamentarians by 5 liters is a step taken in the right direction giving a positive message that polities too are taking some cost cutting measures. But the one off tax imposed on corporate is not a welcome move.”

Read the full article here


Prof. Samarajiva proposes Sri Lankan divest shares

LIRNEasia Founding Chair and Advocata Institute Advisor Prof. Rohan Samarajiva, during a recent event, suggested that the Government divest SriLankan Airlines on the same lines as Air India.

“The objective is to protect the taxpayers of this country from having to continually cover the losses of this technically bankrupt state-owned company,” he said, highlighting the importance of immediate measures to improve public finances.

The national carrier makes a daily loss of Rs. 129.03 million. In the last four years of operation, it has cost the economy Rs. 137 billion in the form of accumulated losses.

Prof. Samarajiva also stressed the importance of building a national consensus to implement immediate reforms to tackle a wide range of issues ranging from unsustainable debt to shortages of essential items in the country.

“We are no longer talking about a crisis that is about to engulf us. We are now in its midst, though not its depths. The hope that the 2022 Budget would give the right signals has evaporated,” he added.

Read the full article here


National consensus mooted to overcome potential sovereign default

A national consensus backed by a common minimum programme, which should be implemented by an independent team of experts, is mooted for Sri Lanka to overcome a potential sovereign default next year.

“As the Central Bank (CB) will be a focal point in this process, we need to transform the CB into a real independent and responsible entity, which can work with a national government. It should give priority to technical advices in its decision-making and it should not be an entity, which experiments different theories such as Modern Economic theory,” LIRNEasia Founding Chair Prof. Rohan Samarajiva told a forum organised by Colombo-based think tank Advocata Institute, under the theme ‘A National Consensus for Economy?’, in Colombo, on Wednesday.

In taking part in the panel discussion, ruling-collation MPs Prof. Ranjith Bandara and Dr. Suren Raghavan as well as opposition MPs Dr. Harsha de Silva, Patali Champika Ranawaka and Vijitha Herath, identified the need of a national consensus to overcome the looming crisis.

Ranawaka estimated Sri Lanka’s external debt repayment obligations at a minimum of US $ 3 billion, which include International Sovereign Bonds (ISB) and Sri Lanka Development Bonds (SLDB) for the next eight months, with only US $ 1.5 billion usable foreign exchange reserves in hand.

Sri Lanka has a US $ 500 million maturing ISB in January, next year and another US $ 1 billion maturing ISB in July next year.

Read the full article


Call for consensus on structural reforms to get out of economic crisis

“We are no longer talking about a crisis that is about to engulf us. We are now in its midst, though not its depths. The hope that the 2022 Budget would give the right signals has evaporated,” Prof. Rohan Samarajiva, a leading policy analyst and an advisor of the Advocata Institute, said.

He made these comments at Advocata’s latest event, ‘A National Consensus for Economic Reforms or Arthikayata jathika sammuthiyak?’. Prof. Samarajiva provided a breakdown of severe economic and social challenges facing the country. His keynote speech stressed on the importance of building a national consensus to implement immediate reforms to tackle a wide range of issues ranging from unsustainable debt to shortages of essential items in the country.

The present macroeconomic instability lies in the failure of the state to implement deep structural reforms to the economy for nearly twenty years. The COVID-19 pandemic has exposed Sri Lanka’s fundamental weaknesses that have plagued the economy for a long period of time.

Read the full article


Defaulting debt repayment can have severe repercussions

Sri Lanka has been running deficits over the decades following the post- independence period when the fiscal deficit was over 10 percent of the GDP.

In 2020 it exceeded 10 percent of the GDP and is likely to deteriorate in 2021. “If the government continues to consume more than it earns or when the domestic private savings are not sufficient to finance the economy it can reflect in our current account deficit. In the absence of domestic saving, the country has to depend on foreign savings to bridge the current deficit,” said Dr. Roshan Perera, Senior Research Fellow of the Advocata Institute at the launch of a publication on “Framework of Sri Lanka’s Economic Recovery at a webinar held this week.

She said in the absence of FDIs coming into the country Sri Lanka had to borrow from abroad. In the 2000 period funds came mostly from bilateral and multilateral sources and concessional financing. But these funds ceased when the country’s rating was elevated to a middle- income country status. When Sri Lanka embarked on infrastructure projects in later years, it had to borrow from private lending agencies and international sovereign bonds with shorter grace periods with higher interest rates. This had an impact on debt service payment which has ballooned over the years. With low foreign inflows coupled with the COVID-19 pandemic, debt servicing has been a challenge, she added.

Read full article


Sri Lanka urgently needs ‘National Consensus’ on deepening economic crisis, policy analysts and politicians say

We are no longer talking about a crisis that is about to engulf us. We are now in its midst, though not its depths. The hope that the 2022 Budget would give the right signals, has evaporated, Prof. Rohan Samarajiva, a leading policy analyst and an advisor of the Advocata Institute said, last week.

He made these comments at Advocata’s latest event , “A National Consensus for Economic Reforms or “ආර්ථිකයට ජාතික සම්මුතියක්?”.

Professor Samarajiva provided a breakdown of severe economic and social challenges facing the country. His keynote speech stressed on the importance of building a national consensus to implement immediate reforms to tackle a wide range of issues ranging from unsustainable debt to shortages of essential items in the country.

The present macroeconomic instability lies in the failure of the state to implement deep structural reforms to the economy for nearly twenty years. The COVID-19 pandemic has exposed Sri Lanka’s fundamental weaknesses that have plagued the economy for a long period of time. The event brought together politicians representing the main political parties to discuss the importance of a united course of action, to drive Sri Lanka’s economy towards a path of growth.

Read full article

Advocata's event on the need for a broader consensus for economic restructuring | News 1st: Lunch Time English News | (25/11/2021)

Advocata's event on the need for a broader consensus for economic restructuring featured on Newsfirst Lunch Time English News

Advocata's event on the need for a broader consensus for economic restructuring | News 1st: Lunch Time Sinhala News | (25-11-2021) දහවල් ප්‍රධාන ප්‍රවෘත්ති

Advocata's event on the need for a broader consensus for economic restructuring featured on Newsfirst Lunch Time Sinhala News

ආර්ථිකයට ජාතික සම්මුතියක්? A National Consensus For The Economy

The Advocata Institute hosted a live discussion on 'ආර්ථිකයට ජාතික සම්මුතියක්?' with Prof. Ranjith Bandara (SLPP), Dr Suren Rāghavan (SLPP), Patali Champika Ranawaka (SJB), Dr Harsha de Silva (SJP), Vijitha Herath (JJB) on November 24th at 6.00PM.

The keynote address was delivered by Prof Rohan Samarajiva (Chairperson, LIRNEasia | Advisor, Advocata Institute). The discussion was moderated by Dhananath Fernando and Sathya Karunarathne.

Watch the live discussion on Advocata Institutes YouTube channel

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Media coverage on 'Essential goods price hike'

Essential goods price hike: ‘Price formula is another way for Govt. to interfere with businesses’

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.

Join 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 interested.

Read the full article here.

Fostering competition and improving productivity are the best form of price control.

Originally appeared in the Daily FT , Daily Mirror

The crucial role of prices in solving the economic problem.

The recent  decision by the government to withdraw several gazette notifications imposing price controls is a step in the right direction.  Consecutive governments have used  price controls  to address equity concerns instead of undertaking the hard reforms needed to create competitive markets.  Prices are central to solving the core economic problem that all societies face: how are scarce resources (re)allocated to meet as many of the unlimited wants of consumers as possible? Allowing prices to carry out this function, so that more consumer wants can be met achieves the best outcome for an economy.  

From such a perspective, the recent decision to end price controls on essential foods (including milk powder and wheat flour) , liquid petroleum gas and cement is  a step in the right direction. Price controls create distortions such as shortages, rationing and the creation of a black market as well as substitution towards low quality alternatives. Although price controls are often introduced by governments with the intention of protecting the poorest consumers in society,  they are  very inefficient, as a means of redistribution. Often these subsidies are biased against the poor as they consume less of these goods than the rich.  Further, sharp increases in prices could have negative consequences on low income households in the short run.  Ideally such price increases should be made gradually so consumers can adjust to them or be able to shift to cheaper alternatives.  

Administratively controlled prices particularly on goods and services provided by the government exert a huge burden on the fiscal, leading to high borrowings and debt.  It also affects the conduct of monetary policy by masking  underlying inflationary pressures. 

Fostering competition and boosting productivity is a better way of reducing the cost of living. This involves removing barriers to entry and deregulating the economy. A good example of this is in the cement industry. The industry is dominated by two players and competition is constrained by a government policy that restricts the number of plants that can operate in each port.  If a new factory is set up,  priority is given to existing operators in the port. This limits new investment and  competitive pricing. Another key issue that makes construction prohibitively expensive is the use of paratariffs (CESS) on imports reducing contestability in the market. There is a misplaced perception that imports are not necessary, where there is local production, but it is the threat of imports that increases contestability, keeps prices low and improves consumer surplus. Further, it also incentivises domestic producers to improve productivity and competitiveness benefiting all stakeholders. 

The same is true of the LP gas industry. There are only two players in the market, i.e., the state-run Litro Lanka Limited and Laugfs Gas PLC.  One would expect that the presence of  Laughs Gas should create some competition in the industry.  However, strict governmental control  over LP gas prices and barriers to entry for new players into the industry, have prevented an efficient market  from developing.  The industry is highly capital intensive and the lack of storage facilities is the most significant  entry barrier.  Allowing  the use of common storage facilities along with opportunities in distribution will make the industry more competitive, exerting  a downward pressure on prices in the long run.  

Our experience over the past few months illustrate the adverse impact of price controls on the economy.  At the same time, governments are also  concerned that removing price controls would generate inflationary pressures. However, through careful management and communication, one - off increases in prices need not feed into inflation expectations and wage negotiations.  This requires tight rein over demand driven inflation and credibility that the central bank would use its monetary policy tools to keep inflation within its targeted range of 4 - 6 per cent. 

Hence, going forward, we urge the government to refrain from using price controls to address equity concerns. Instead, creating a competitive business environment and boosting supply is the best solution to lower prices in the economy. In order to support vulnerable households the government should provide a cash transfer to cushion the impact of price increases of essential commodities. This would require a re-examination of the Samurdhi scheme which currently excludes some of the most vulnerable households and tighter administration to ensure benefits accrue to those who need it most. 

Advocata’s Analysis on Price Controls can be found at; https://www.research.advocata.org/wp-content/uploads/2018/10/Price-Controls-in-Srilanka-Book.pdf

Key Points 

  • Recalling gazettes imposing price controls is a move in the right direction. 

  • Allowing market focus to set market prices prevents price instability. 

  • Allowing more competition and the entry of private sector players is the only  policy solution to counter the adverse effects of unsustainable increases in market prices.   

 

Media coverage on මිල පාලනයෙන් පොඩි වෙන මිනිස්සු - Cyber Conference

Lifting price controls will help local milk producers

The shortage of essential products can be mitigated by creating a competitive business environment without price controls for imported and local products, according to an economic expert.

Chief Operations Officer of Advocata Institute Dhananath Fernando said by doing so, the consumer will be provided with an opportunity to select whatever goods that are suitable for them.

Participating in a discussion at the Government Information Department, he cited imported milk powder as an example and pointed out that freight charges have been increased by five or six-folds, adding that it was a world issue and not something exclusive for Sri Lanka.

Read the full article here

ITN News Coverage

Rupavahini News Coverage

It’s time for urgent economic reforms

Originally appeared on Daily FT, The Morning, Ada derana Biz , Lanka News Web

It’s time for urgent economic reforms 

  • Sri Lanka faces one of the worst economic crises in its history.

  • COVID-19 pandemic only exacerbated the existing weaknesses in the economy, the roots lie in unsustainable debt, fiscal indiscipline and low rates of growth. 

  • To get out of the crisis comprehensive and deep economics reforms that are structured to a clear timeline is needed, says top Economists. 

Sri Lanka should carry out urgent and credible economic reforms to create a stable environment to emerge from one of the worst economic crises in its history triggered by unsustainable spending, debt and stifling controls, a panel of economists said.

“There is no doubt that Sri Lanka is facing a severe economic crisis. Macroeconomic stabilization is the need of the hour ” said Dr. Roshan Perera,  Senior Research Fellow at Advocata Institute, Colombo-based think tank .  She made these comments  at an online event to launch Advocate's latest publication, ‘A Framework for Economic Recovery’.  She provided a breakdown of the economic challenges before the economy. In her presentation, Dr. Perera stressed the need for immediate reforms to tackle unsustainable public debt. 

The report identifies that the macro-economic instability lies in the failure of the state to implement deep structural reforms to the economy for nearly twenty years. The COVID-19 pandemic has exposed Sri Lanka’s fundamental weaknesses that have plagued the economy for a long period of time. The event included comments from experts on Advocata Institute’s board of advisors. 

“None of these policy prescriptions are new. We have talked about them for years. But it's a matter of political will to do them. We have hit a brick wall and we need to come together as a whole and take responsibility,” Advocata’s Academic Chair Dr. Sarath Rajapatirana said.

“We need to think of the external balance not only for today but for tomorrow. We have to grow our way out of debt as opposed to starving ourselves out of debt” said Dr. Nishan de Mel, Executive Director of Verite Research and an advisor to Advocata.  Highlighting the importance of getting the balance right on growth and austerity in dealing with the crisis. 

Prof. Rohan Samarajiva, Chairperson, LIRNEASIA and an advisor of the Advocata, explained the urgency of deep structural reforms by describing the present economic challenge. “We are in a war-like situation”. He said, stressing that what we need is a common minimum program of reform agreed by many.  “Identify the key sectors - utilities and trade which would play a huge role in the economy to build confidence. We would have to bring back parts of the 19th amendment”. He said, highlighting the importance of political reform facilitating better economic outcomes. 

Research shows that Sri Lanka needs structural readjustment. “ Sri Lanka needs some bitter policy doses at this level to get the economy back on track. We haven’t touched policy reforms for over 20 years, for which we are paying now. And we are looking for short term solutions for a long term problem”, said Professor Sirimal Abeyrathne, Senior Professor of Economics, University of Colombo.

Advocata’s report,  A Framework for Economic Recovery, consists of a series of urgent macroeconomic reforms to address the present crisis. This includes the implementation of a macroeconomic stabilization program, prioritising fiscal consolidation and debt restructuring,  public finance management and public sector reforms.  Other reforms include state-owned enterprise reform, enhancing monetary policy effectiveness and maintaining a flexible exchange rate. 

Trade reform to strengthen exchange rate sustainability.  Other structural reforms such as land reform, improving ease of doing business and bridging infrastructure gaps to boost productivity and achieve growth. Advocata Chairs, Mr. Murtaza Jafferjee, Dr Sarath Rajapatirana, Mr. Dhananath Fernando, COO Advocata Institute and key advisors, Prof. Suri Ratnapala,  Professor of Law, University of Queensland, Anarkali Moonesinghe, Board Member Lankan Angel Network, Dr. Sujata Gamage,  Senior Research Fellow, LIRNEASIA, Dr. Nishan De Mel, Executive Director at Verité Research, Prof.Prema-Chandra Athokorala, Emeritus Professor of Economics, ANU, spoke extensively on each of these areas of reform, while expressing concern over the present economic crisis.  

Media coverage on " A Framework for Economic Recovery"

Sri Lanka’s Possibility of Debt Default is Real

Sri Lanka’s possibility of debt default is real, the Colombo-based public policy think tank Advocata Institute said, yesterday. Launching its latest publication, “A framework for Economic Recovery”, Advocata’s Senior Research fellow Dr. Roshan Perera said that the country is facing one of the worst macroeconomic crises in its history and with rapidly depleting foreign reserves position and the Government’s limited options to finance its foreign debt service obligations will adversely affect the nation’s debt sustainability. Therefore, they urged the policy makers to identify, prevent and address macroeconomic imbalances that could adversely affect the economic stability of the country. 

Sri Lanka’s economy has been characterised by twin deficits, i.e., it has run both a fiscal deficit and a deficit in the external current account. This implies that the country has been spending and consuming more than it earns and produces. 

“Priority should be given to correcting the twin deficits, stimulating economic growth and improving competitiveness while building buffers to strengthen the resilience of the economy to shocks”, it stated. According to their observations, fiscal dominance has been the root cause for macroeconomic instability adversely affecting growth, inflation, interest rates and the exchange rate. Fiscal indiscipline has also significantly narrowed the space for monetary policy.

 “Weak public finance management arising from inadequate revenue collection and uncontrolled expenditure has meant the Government has continued to run budget deficits, relying on borrowings to finance the shortfall. This has led to high and unsustainable debt levels,” the report stated. According to the Advocata, completing the Extended Fund Facility (EFF) programme entered into with the International Monetary Fund (IMF) in 2016 would be imperative to restoring macroeconomic stability.

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Top panel sounds alarm, insists it’s time for urgent economic reforms

Sri Lanka should carry out urgent and credible economic reforms to create a stable environment to emerge from one of the worst economic crises in its history triggered by unsustainable spending, debt and stifling controls, a panel of economists said.

“There is no doubt that Sri Lanka is facing a severe economic crisis. Macroeconomic stabilisation is the need of the hour,” said Advocata Institute Senior Research Fellow Dr. Roshan Perera, addressing the online event to launch Advocata’s latest publication, ‘A Framework for Economic Recovery’. Advocata is a Colombo-based think tank.

Providing a breakdown of the economic challenges before the economy, in her presentation Dr. Perera stressed on the need for immediate reforms to tackle unsustainable public debt.

The report identifies that the macro-economic instability lies in the failure of the State to implement deep structural economic reforms for nearly 20 years. The COVID-19 pandemic has exposed fundamental weaknesses that have plagued Sri Lanka’s economy for a long period of time.

The event included comments from experts on Advocata Institute’s Board of Advisors.

“None of these policy prescriptions are new. We have talked about them for years, but it's a matter of political will to implement them. We have hit a brick wall and we need to come together as a whole and take responsibility,” Advocata’s Academic Chair Dr. Sarath Rajapatirana said.

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Economists call for an extensive review of the tax system to improve revenue mobilisation

An improvement in Sri Lanka’s revenue mobilisation effort requires an urgent and extensive review of the tax system, to ensure the government can meet its expenditure commitments, while the country is in the midst of one of the worst macroeconomic crises in its history, economists said.


Pointing out that the national economy is heading towards a “precipice”, Colombo-based economic think-tank Advocata Institute asserted in its latest publication titled ‘A Framework for National Recovery,’ that the “serious erosion” in government revenue and its implications for macroeconomic stability call for a comprehensive review of the tax system.


According to the report, some of the areas that require attention include; reducing the tax threshold and widening the tax base, reintroducing the PAYE and WHT, reducing the excessive reliance on indirect tax as it is currently at about 80 percent, rationalising tax incentives, introducing new taxes, and strengthening the tax administration.


Currently, the income tax threshold in Sri Lanka is four times its per capita GDP, and also higher than the tax threshold in countries with per capita incomes that are several times that are of the island nation. The report recommends bringing down the threshold while also adopting measures to bring in employees into the formal sector so the tax base is widened.

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Key Ways to Boost Revenue

Making tax administration technology driven, instituting land tax and removing tax exemptions are among three ways that Sri Lanka can boost revenue, Advocata Institute, a think tank, in a recent report, said. The think tank in a report titled ‘A Framework for Economic recovery’ dated July said that Government of Sri Lanka (GoSL) revenue which was 21 per cent of GDP in 1990 was averaging 15 per cent during the period 2005-2009. ‘This has plummeted even further to around eight per cent by 2020,’ it added. The key revenue earner for GoSL is taxation. ‘Further, around 80 per cent of tax revenue collected in 2020 was from indirect taxes, increasing the regressivity of the tax system, with lower income earners bearing a higher burden of taxation,’ the report warned. 

There is also a significant concentration of taxes collected from a few commodities such as tobacco, liquor, motor vehicles, and food and beverages, said Advocata. This also increases the regressivity of the tax system as some of these are considered essential items and form a higher proportion of the consumption basket of low income earners, the think tank further warned. In order to broaden the tax base, new taxes such as land taxes should be introduced, the think tank advocated. Meanwhile, despite commissions set up to review the tax system, as well as donor funded programmes initiated to address the weaknesses in tax administration there, has been very little progress on this front, said Advocata.

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Look at options to meet debt obligations - Advocata Report

An independent policy think tank launching its latest publication; “A Framework for Economic Recovery” in Colombo last week called on policymakers to pay serious attention to consider all  options available to meet the country’s debt obligations which is in the tune of around US $25 billion in foreign debt between now and 2026.  The report by the Advocata Institute presents a framework for macroeconomic stabilisation and emphasises the need for urgent economic reforms. The panel comprising well-known economists and heads of think tanks urged policymakers to look at all options to meet the obligations as there could be a possibility of defaulting on debt obligations which would reflect badly on the country.

The urgency to seek ways and means to meet the obligations or restructure debt was underpinned due to the fast depleting  foreign reserves estimated at US $ 2.8 billion as at the end  July this year, foreign inflows affected by the pandemic and negative investor sentiments. 

The author of the report and Senior Research fellow of Advocata, Dr. Roshan Perera said debt restructuring is not an easy task and added that the possibility of resuming a program with the International Monetary Fund should be looked into.

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Defaulting debt repayment can have severe repercussions

Sri Lanka has been running deficits over the decades following the post- independence period when the fiscal deficit was over 10 percent of the GDP.

In 2020 it exceeded 10 percent of the GDP and is likely to deteriorate in 2021. “If the government continues to consume more than it earns or when the domestic private savings are not sufficient to finance the economy it can reflect in our current account deficit. In the absence of domestic saving, the country has to depend on foreign savings to bridge the current deficit,” said Dr. Roshan Perera, Senior Research Fellow of the Advocata Institute at the launch of a publication on “Framework of Sri Lanka’s Economic Recovery at a webinar held this week.

She said in the absence of FDIs coming into the country Sri Lanka had to borrow from abroad. In the 2000 period funds came mostly from bilateral and multilateral sources and concessional financing. But these funds ceased when the country’s rating was elevated to a middle- income country status. When Sri Lanka embarked on infrastructure projects in later years, it had to borrow from private lending agencies and international sovereign bonds with shorter grace periods with higher interest rates. This had an impact on debt service payment which has ballooned over the years. With low foreign inflows coupled with the COVID-19 pandemic, debt servicing has been a challenge, she added.

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Poor economic performance linked to poor economic governance: Experts

Sri Lanka’s poor performance across multiple areas in the economy is linked to the economic governance of the country weakening over the years, despite an ever expanding public sector, according to some leading economists and practitioners of law in the country.

As having the right institutional strength is essential and imperative for an economy to prosper in the medium to long term, top economists and legal practitioners this week attributed the repeated issues faced by the country to the grim economic governance, which remains unaddressed and unacknowledged.

According to Emeritus Professor of Public Law Suri Ratnapala, a starting point for Sri Lanka in this regard would be to initiate the process of rebuilding institutions of the state, judiciary, enforcement agencies and auxiliary organisations that support the legal system.

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Addressing Sri Lanka’s macroeconomic imbalances 

We are 18 months into the pandemic but the policymakers are yet to announce a proper programme to save Sri Lanka from the economic crisis it is currently facing now. Although many policymakers blame the Covid-19 pandemic for the current economic situation, by now many have realised the pandemic just unveiled the curtain behind which all the troubles of Sri Lanka’s economic system were kept hidden. 

Colombo-based think tank Advocata Institute, on 14 September unveiled a Framework it has prepared for Sri Lanka’s Economic Recovery. The report was prepared by Advocata Institute Senior Research Fellow and Central Bank of Sri Lanka (CBSL) former employee Dr. Roshan Perera. 

Presenting the report, she said that for consumers and producers to be able to make long-term decisions there needs to be stability in the economy and highlighted what is really meant by stability. 

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Resolving the economic crisis and facing challenges with reforms

Dr. Rajapatirana pointed out that Sri Lanka’s trade as a percentage of GDP has been low compared to Thailand and Vietnam because we have not exploited our opportunity to trade as we have high tariff rates compared to other developing countries.

Furthermore, although tariffs play a role in protecting domestic infant industries, if tariffs are too high, they can become anti-competitive. Dr. Rajapatirana observed that recent import restrictions, such as banning a wide range of consumer goods from April 2020, have further worsened Sri Lanka’s growth potential and put Sri Lanka at odds with WTO rules.

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Sri Lanka cronies profiting from import controls, SMEs battered: Samarajiva

Sri Lanka’s so-called cronies who benefit from customers trapped under state controls are raking even more profits from current import controls, while smaller firms are getting wiped out, a policy specialist and liberator of poorer consumers said.

Many domestic businesses also needed inputs.

“Import controls are creating a lot of opportunities for permit holders and cronies to make money,” Rohan Samarajiva, founder of LirneAsia, a regional policy advisory group told a forum organized by Advocata Institute, a Colombo-based think tank.

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Is economic recovery possible?

“The economy should grow steadily and sustainably. It should have a sound financial system, be resilient to shocks with inflation under control,” said Dr. Roshan Perera, Senior Research Fellow of the Advocata Institute during a recent webinar on building a framework for economic recovery in Sri Lanka. Explaining that in the economical environment, there are internal and external imbalances to be found, she said internal imbalance consists of issues such as the government spending limitlessly, too much money in the economy and uncertainty. Whereas external balance means a combination of inflation and exchange rates that makes imports more attractive and exports uncompetitive. This includes abrupt changes in the exchange rates that call for financial assistance and in the extreme defaulting on payments to the rest of the world, she explained.

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A Framework for Economic Recovery

The Advocata Institute launched its latest publication on "A Framework for Economic Recovery" on September 14 at 3.30 PM.

This report can be accessed below.

A Framework for Economic Recovery” Report

The report authored by Advocata’s Senior Research fellow Dr. Roshan Perera and Advocata’s research team proposes key policy recommendations to overcome these challenges. The report presents a  framework for macroeconomic stabilization and emphasizes the need for urgent economic reforms.

The presentation by Dr. Roshan Perera on "A Framework for Economic Recovery" can be accessed below.

"A Framework for Economic Recovery" Presentation

The launch was virtually held with the attendance of the press and was live-streamed on Advocata Institutes social media channels.

Watch the live discussion on Advocata Institutes YouTube channel

Key speakers included; Advocata Academic Chair, Dr. Sarath Rajapatirana, Advocata Chair, Murtaza Jafferjee, Dhananath Fernando (COO Advocata Institute) and key advisors, Prof. Rohan Samarajiva ( Chairperson, LIRNEASIA), Prof. Suri Ratnapala ( Professor of Law, University of Queensland), Anarkali Moonesinghe ( Board Member Lankan Angel Network), Dr. Sujata Gamage, ( Senior Research Fellow, LIRNEASIA) and Prof.Prema-Chandra Athokorala (Emeritus Professor of Economics, ANU).

Diagnosis of Sri Lanka's Current Economic Crises and Potential Solutions

Advocata Institute Chair Murtaza Jafferjee on the “Diagnosis of Sri Lanka's Current Economic Crisis and Potential Solutions” organized by CFA Society Sri Lanka on September 10th 2021.

Download the full presentation:

Diagnosis of Sri Lanka’s Current Economic Crisis

Year on year increase in food prices of 30%

Originally appeared in the Daily FT

Advocata’s Bath Curry Indicator (BCI) which tracks the monthly changes in the price of a basket of commonly consumed food items recorded a 30% increase between August 2020 and August 2021. Prices have soared due to a multitude of factors in the last few years. Prices of the same basket of food items tracked on the BCI is up 70% compared to August 2019.

This means that an average family, who spent  Rs.757 weekly on the BCI basket of food items in August 2019 now has to pay Rs 1,288 for the same basket of goods. This is roughly Rs. 500 more than in 2019.  

The month of August however recorded a minor decrease in food prices compared to the previous month, with the prices falling by 1.57% driven by lower prices for onions, rice and green chillies, whilst vegetables such as beans and pumpkin increased.

The items that contributed the most to prices falling in the month of August 2021 were Green chilli (21%), Red onions (19%) and samba rice (8%). 

Alternatively the prices of beans (6.92%), pumpkin (12.46%), brinjals (8.83%) and Dhal (0.71%) increased. 

The BCI tracks the weekly retail prices in the Colombo market of the most commonly consumed food ingredients that might be used in a typical Buth curry meal. The prices are collected from the “Weekly Indicators” that the Central Bank publishes. 

  The BCI Indicator can be accessed at www.bci.advocata.org.

Advocata's Aneetha Warusavitarana Awarded Commonwealth Scholarship

Originally appeared on The Morning, Daily FT, Daily Mirror

Aneetha Warusavitarana secures a place at Cambridge University.

Aneetha Warusavitarana, Research Manager,  from Colombo based independent policy think-tank Avocata Institute has been awarded the prestigious Commonwealth Shared Scholarship.  Aneetha is set to start on her MPhil in Public Policy at the University of Cambridge this year. 

Aneetha Warusavitarana played an important role in driving numerous research projects aimed at promoting sound public policy ideas for a freer and more prosperous Sri Lanka at the Advocata Institute.  Her work in Sri Lanka’s public policy space consists of driving advocacy campaigns and research on Micro, Small and Medium Enterprise reform, Period Poverty, Trade Liberalisation and State-Owned Enterprise Reform in Sri Lanka to name a few. Aneetha is a product of Ladies’ College Colombo and the University of London International Programmes, where she graduated with a first class in  International Development. 

Dhananath Fernando, Chief Operating Officer of the Advocata Institute said, “Aneetha played a significant role in Advocata Institute's growth as a public policy think tank. Her accomplishments include delivering and maintaining a high standard of research, while also providing thought leadership on a range of public policy issues”.   As an independent public policy think-tank, the Advocata Institute will continue to work and nourish such talent and leadership. Therefore Aneetha would also be joining the Advocata Institute as a Visiting fellow and would continue to contribute to our work. The Advocata Institute wishes her the best in all her future endeavours.


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.

Top economists: Sri Lankan import restrictions at odds with WTO rules, hurts welfare of Sri Lankans

Originally appeared in the Daily FT, Ceylon Today, Ada derana Business

The Advocata Institute DeepDive Series on “ The Role of Trade in Sri Lanka’s Economic Recovery”

COLOMBO, Sri Lanka— A panel of eminent economists urged that the Government take credible and decisive action to carry out immediate trade reforms. Advocata’s Academic Chair Dr. Sarath Rajapatirana, emphasised that “Countries that have grown very fast, especially in east asia have understood the importance of trade reform”. Further adding that the first step of such a reform agenda should be to simplify the taxes at the border by removing the so-called ‘para tariffs’ that Sri lanka levies beyond the regular import duties and to introduce a single uniform tariff for all imports. 

Sri Lanka’s trade as a % of GDP has been low when compared to neighbouring countries like Thailand and Vietnam, indicating that we have not truly exploited our opportunity to trade. Research shows, Sri Lanka, has high tariff rates compared to other developing countries, and while tariffs play a role in protecting domestic infant industries, if tariffs are too high, they can become anticompetitive. Recent import restrictions, such as banning a  wide range of consumer goods since the beginning of April 2020,  have further worsened Sri Lanka’s growth potential and put Sri Lanka at odds with WTO rules. 

Dr. Dayaratna Silva ( International Trade Economist, Former Sri Lankan Ambassador to the World Trade Organization)  elaborated on the severe consequences for Sri Lanka’s economy if such import restrictions continue. He explained that there is a possibility of tariff retaliation. “Prolonged import controls are not consistent with the WTO, and its high time such is readdressed”, he went on to say. 

Such forms of retaliation could have a significant negative effect on our imports, thereby worsening our existing foreign exchange and balance of payment crisis. Another key long term concern for the economy. “My worry is the long term industrial development of the country because of these restrictions. Resources are inefficiently being allocated as a result”, further commented Dr. Dayartna De Silva. 

His Excellency  Denis Chaibi ( Ambassador, Delegation of the European Union to Sri Lanka and the Maldives) commented on the importance of adhering to global rules on trade. He commented that “the European Union tries to have a rule based order. When a country does not follow those rules, the rule based structure is affected. Without trade, for a small country like Sri Lanka, the prospect is not good”.  His comments brought into perspective the wider ramifications of import restrictions on Sri Lanka’s multilateral relations.  

 Professor Prema- Chandra Athukorala (Emeritus Professor of Economics, Arndt-Corden Department of Economics, ANU), who is an authority on global production networks, explained that “No country in the world now produces goods from the beginning to end within their geographic boundaries. Countries specialise in different components within the production value chain. Made in the country X label has become invalid, a  Country has to identify comparative advantage within the production network. “. Thereby elaborating on how Sri Lanka cannot achieve economic growth without joining global production networks through trade. He concluded by commenting on recent developments of import controls by saying that “selective intervention, without disturbing the incentive structure of the country as a policy, is going to be a recipe for disaster”.

These views were expressed at the event “Deep Dive”, organised by the Advocata Institute that aims to bring focus on Sri Lanka’s biggest policy challenges. The event was moderated by  Aneetha Warusavitarana, Research Manager, Advocata Institute.  As a precursor to the event,  Advocata released a primer on debt sustainability with the aim of helping Sri Lankans understand the topic.  The recording of the discussion can be found at Advocata Institute’s YouTube Channel https://www.youtube.com/watch?v=8M981XmlbAs / to get a comprehensive understanding of Trade and how it affects Sri Lanka’s economy and the livelihoods of all Sri Lankans. The event was organised in partnership with the European Union. 

AdvoChats | Economic Reforms, The Need of the Hour? with Rehana Thowfeek and Daniel Alphonsus

The Advocata Institute hosted its first 'AdvoChats' with Rehana Thowfeek (Economic Researcher and Blogger) and Daniel Alphonsus (Former Advisor to the Ministry of Finance) on the topic 'Economic Reforms, Need of the Hour?' where they discuss the need for economic reforms in Sri Lanka.

Advochats is a series specifically designed to convey the seriousness of the current economic situation of the country to our audience and encourage the crowds to initiate conversations, ask questions and take part in the much-needed discussions on reforms Sri Lanka needs.


Follow @advocatalk on Instagram for future chats https://www.instagram.com/advocatalk/

You can watch the full discussion on Youtube

Excessive Price Controls will worsen Shortages

Originally appeared in the Daily FT , Daily Mirror, Ceylon Today, Sunday Times and Ada Derana Business

New measures treating the symptoms rather than the disease.

COLOMBO, Sri Lanka— 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.