ECONOMYNEXT – Sri Lanka’s Consumer Affairs Authority has blocked the entry of powdered milk into the market with its power to control prices and is expected to ease the restriction next week, which could allow imported supplies to reach the market , according to reports.
Sri Lankan Minister of State for Consumption Lasantha Alagiyawanna had met with powdered milk importers on Saturday to discuss new price controls and agreed to an increase of Rs 200 per kilogram from the requested 350, said reported private television Derana.
It will be submitted to the government cost of living commission for approval.
Sri Lanka’s Consumer Affairs Authority had created serious hardship for people creating shortages of milk powder and liquefied petroleum gas with its price controls, forcing importers to suspend operations to avoid bankruptcy.
Price controls automatically lead to rationing and black markets.
Lakshman Weerasuriya, a member of an association representing powdered milk importers, told the TV station that the exit price of 945 rupees was set at a time when the rupee was at 186 per US dollar and milk powdered at $ 2.80 per kilogram.
The Sri Lankan rupee had collapsed due to money printing – mainly to pay civil servants’ salaries – which triggered currency shortages and excessive imports.
“Although the US dollar is listed at 203 rupees in banks, we buy at 238 rupees,” he said. “A ton of powdered milk is 4,100 to 4,200 US dollars.
“We asked for an increase of 350 rupees. We were offered 200 rupees. We hope to sign an agreement next week.
“But we said that was if the dollars were available at 203 rupees.”
Sri Lanka operates a deadly monetary arrangement without a coherent anchor called a “flexible exchange rate” where convertibility is suddenly and arbitrarily suspended from time to time, resulting in currency collapses.
At present, convertibility at 203 for the US dollar had been suspended for most commercial transactions by the central bank, which led the exchange rate to float in an over-the-counter market towards 230 for the dollar. American.
If the price increase is allowed and importers can import the product, a 400 gram packet of powder will increase from Rs 78 to Rs 458, according to the report.
The central bank printed money mainly to pay civil servants’ salaries after tax cuts in December 2019 created a large hole in the budget, which was made worse by a ban on imports of cars and other heavily taxed items.
Money was printed to fill gaps in the budget and also through price controls at bond auctions, where actual bids dried up like milk powder.
Newly appointed Central Bank Governor Nivard Cabraal lifted price controls within a day of taking office and there is expected to be some rate volatility as the market gets used to operating without controls and money begins to flow after the rate hike.
CAA executive director Thushan Gunewardene, who was in charge while the agency created most of the shortages, is expected to step down next week, according to the report.
Whole milk powder prices climbed to around $ 4,250 per tonne in March 2021, then fell to 3,500 levels. However, since August, prices are on the rise again.
The WMP contract for delivery in October (with no freight or associated charges) has already climbed to $ 3,720 according to Global Dairy Trade, an industry portal.
The US Fed also triggered a Powell bubble pushing up the prices of commodities, energy, precious metals and base.
Mainstream economists had said Fed chief Jerome Powell, who prints about $ 120 billion a month, was “delusional” for calling the soaring commodity prices “transient” and dismissing any connection to mass. rapidly expanding monetary policy.
Powell had unpaid excess reserves, a key collateral that had previously shielded America’s credit system from the worst effects of Keynesian cash injections. (Colombo / September 19/2021)