Sri Lanka's Ditwah Response: Beware the "Unseen" Economic Impacts 📉

• Sri Lanka's progress is repeatedly hindered by policies that neglect "unseen" economic consequences, especially urgent now with the Ditwah disaster response and monetary policy. • Price Controls Fallacy: • Following Ditwah, government action against retailers raising prices for necessities is seen as suppressing a price spike. • The "unseen" effect, however, is prolonged shortages, misallocation of resources, and disincentivizing the private sector from taking risks to deliver goods. • Higher prices naturally ration limited goods and incentivize entrepreneurs to increase supply, which would eventually drive prices down. • Central Bank & Inflation Tax: • Post-Ditwah, increased government spending for relief is likely to be financed by the Central Bank printing money, similar to the post-COVID period. • This "invisible tax" (inflation) dilutes purchasing power, transfers wealth from the poor to the rich (Cantillon Effect), and creates artificial economic booms followed by busts. • The Central Bank is argued to have "completely failed" its mandate of financial, economic, and price stability since its inception, leading to profound societal costs. • Path Forward: • The government must empower market mechanisms rather than attempting to override them. • Focus on fundamental duties: upholding the rule of law, protecting property rights, and ensuring a stable monetary framework. • This restraint would free capital, honor savers, and allow market prices to efficiently allocate resources, fostering a resilient, private-sector-led recovery and prosperity.