Wednesday, May 25, 2022

Is the government in a position to introduce price control?

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QUESTION OF THE DAY

Price control used to exist under the first republic. The government used to control the foreign exchange and businesspersons used to rely on that foreign exchange to import goods. The government came to a point where it was not exporting enough to earn foreign exchange to give to the importers. The importers decided not to bring goods into the country as long as the government did not provide them with the foreign exchange to import. When that happened there was scarcity of goods.

The government of the first republic then decided to remove price control and its monopoly of the foreign exchange market, thus allowing those who used to import to make their own effort and therefore price control was removed.

Since then and the country operates what it calls a liberal economy where there is no price control. It is not likely that the Barrow administration will move away from such a policy since it is not promoting an export oriented economy that would earn foreign exchange as sovereign national wealth to be able to back the growth of the productive base and ensure import substitution.

The more we produce what we import the more we control import based inflation. This is the sustainable way of ensuring greater capacity to regulate and control prices in accordance with established production and consumption indices.

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