Sri Lanka rice price controls fuels fears of black market

April 18, 2008 (LBO) – Sri Lankan traders Friday said they had agreed to sell rice at the new government controlled price but many wholesale shops remained closed in key markets amid warnings of a shortage and emergence of a 'black market'. Government officials said they would crack down on 'unscrupulous' traders who were trying to create an 'artificial' rice shortage and make a profit when plenty of stocks were available.

Blame Game

In many countries politicians and state official blame private traders for price rises in bid to gain public sympathy when markets responds to economic forces unleashed by governments.

Sri Lanka last imposed price controls on rice in the mid 1970's when amidst heavy money printing when imports were severely restricted.

After printing money heavily for two years Sri Lanka has tightened monetary policy this year, but local rice prices are higher than international prices due to earlier restrictions on imports, where only state firms were allowed to import rice.

Meanwhile Sri Lanka's monetary regime, which is pegged to the US dollar has also been a sitting duck for inflationary forces unleashed by US money printing to save the country's banking system.

Global prices in commod