ECONOMYNEXT – Sri Lanka’s National Medicine Regulatory Authority will seek court approval for a price formula for a large number of drugs, Health Minister Nalinda Jayatissa said.
Some pharmaceutical companies went to court in the wake of earlier planned price controls, Minister Jayatissa told reporters Wednesday.
“The information will be submitted to court for approval,” Minister Jayatissa said.
Sri Lanka started the NMRA in 2015 even as the central bank was injecting money through open market operations to cut rates, claiming inflation was low based on historical 12-month data.
At the time global commodity prices including fuel was also falling following 2014 quantity tightening by the Fed.
Analysts warned at the time that Sri Lanka’s parliament should take action against the discretionary power of the central bank to print money for flexible inflation targeting rather than resort to more price controls.
RELATED Sri Lanka’s pharma control Neros fiddling while Colombo burns with falling rupee
“Already this administration has destroyed the rupee from a little over 130 to over 140 rupees now,” EN’s economic column said in November 2015.
“So import costs of drugs are up 7 or 8 percent already this year, thanks to the state, rulers, bureaucrats, the Central Bank and the state generally.
“If prices have not gone up already, it is due to private sector efficiencies and a reduction in margins they have taken.
“Money is still being printed. Expect more currency depreciation.
“The NMRA is a farce. It is a dangerous farce. If the rulers want to keep prices down, not only of drugs but of all goods, first follow prudent monetary and fiscal policies that allows for exchange rates to be stable.
The central bank eventually pushed the rupee down to 152 to the US dollar in the 2015/2016 flexible inflation targeting/potential output targeting crisis with mostly open market operations.
In 2018, the rupee was busted to 184 through money printed through open market operations and dollar rupee swaps.
As the central bank busted the rupee with backward looking data driven monetary policy, pharma firms called for depreciation linked price controls.
Related Sri Lanka’s pharma firms call for depreciation linked price controls
In 2020/2022 the rupee was depreciated to 360 to the US dollar through liquidity injected direct market, open market operations and dollar/rupee swaps.
Since 2022 the rupee has been strengthened amid deflationary policy. However analysts say the single policy rate, which implies an abundant reserves regime (excess liquidity) could spell further trouble as private credit recovers, even if fiscal policies are better.
Monetary debasement for statistics (data driven monetary policy/REER/competitive exchange rate) results in higher prices not only of drugs, but also food and energy. Price controls also give rise to corruption. (Colombo/Mar27/2025)
