Government Intervention Sri Lanka

Maximum Prices

“Sri Lanka has used long-standing price ceilings on essentials such as rice and fuel, which frequently created excess demand, shortages and black market trading”

 “During economic instability, the government imposed fuel caps to keep prices affordable, but because the controlled price was below equilibrium, consumers faced hours long queues and persistent scarcity”

Minimum Prices

“Government introduced minimum prices for certain crops such as paddy rice which distorted production incentives by raising the price above the market equilibrium, encouraging inefficient over-production”

Taxation

“The government raised excise duties on alcohol and tobacco to curb consumption of demerit goods”

Regulation

“Restrictions on deforestation and wildlife protection laws aim to reduce negative externalities, but weak enforcement often limits their effectiveness.”

“The abrupt regulation banning chemical fertiliser created major information and supply failures, reducing yields and demonstrating unintended consequences of poorly designed regulation.”

Nationalisation

“Government ownership of SriLankan Airlines has imposed repeated fiscal burdens due to persistent losses, illustrating how nationalised industries may generate dynamic inefficiency.”