By Michelle Sutherland
As the debate rages on about whether the new price control policy will assist in combating inflation, Economic Lecturer Dr. Phillip Castillo says that, in his view, price control ought to be used as a last resort to combat inflation.
“Speaking in general terms, price controls ought to be used as a last resort in specific situations and for specific time periods,” Castillo explained. “It's generally challenging to implement and effectively monitor price controls in an import-dependent economy such as Belize.”
As he has explained in previous interviews, Castillo pointed out that because Belize is an import-dependent economy, most of its inflation is imported, and as such is something that is hard to address.
When asked whether he believes the new measures will do more harm than good, Castillo told The Reporter that he believes that the government has access to economic advice and, more than likely, some high-level discussions must have occurred before its implementation.
''There are benefits and costs and I believe GOB must be of the view that benefits outweigh costs. From the perspectives of beneficiaries, it's always positive; from the perspectives of businesses it's always negative.”
At the end of June, the Cabinet announced that it had approved a review of the current list of regulated goods and agreed that the list would be expanded to 40 items, including food and non-food items. Under the Supplies Control Act, these items would have a 15 or 20% markup.
While some areas of society welcomed the announcement, entities such as the Belize Chamber of Commerce and Industry have come out to raise concerns such as how would the 15 or 20% be determined. How was the specific percentage arrived at, and which goods are included regarding quality, brand origin, and enforcement?
Alternative Policy
However, international agencies such as the World Bank have likewise raised concerns about price-control policies. For its part, the World Bank, in a 2020 working paper, wrote:
“Moreover, price controls that distort consumption towards price-controlled goods can cause chronic shortages of these goods, the formation of parallel markets with higher prices, and substitution towards lower-quality alternatives.”
They also concluded that the go-to policy should be more targeted support to vulnerable households:
“Price controls … while often implemented with the best social intentions in mind, these policies often distort markets and their consequences for growth, poverty reduction, and government policies grow over time. Countries can replace price controls with expanded and better-targeted social safety nets, coupled with reforms to encourage competition and a sound regulatory environment.”
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