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By Channa Kasturisinghe

Following media reports and allegations by opposition parties of escalating prices of essential items, Deputy Finance Minister Bandula Gunawardana said yesterday that such claims were baseless as statistics show a decline in prices as a whole after the United National Front (UNF) took office.

He said the inflation rate reduced 14.2 to 9.6 percent last year and it will be further reduced to 7.5 percent at the end of this year due to the Government's efforts. "The Colombo Consumer Price Index and the Sri Lanka Consumer Price Index clearly show that the overall prices of essential items have in fact reduced since last year.

Minister Gunawardana said that the prices of consumer items and services fluctuate due to various reasons and one should to look at the prices of the items as a whole to see if there is a price increase. "There is no truth in various media reports that the prices of consumer items have gone up. In fact during the last year and the first quarter of this year the rate of price increase has come down significantly.

This is evident if one looks at the inflation ratios during the last two years. It was 14.2 percent in 2001. We were able to bring that down to 9.6 percent in 2002. According to the CBSL calculations we will be able to reduce it to 7.5 percent by the end of this year," the Minister said.

He said the United National Front Government has taken several measures to bring down inflation since they took office.

We have deviated from the policy of reducing the budget deficit by borrowing from the Central Bank and the commercial banks. That has enabled us to bring down the lending interest rates significantly.

It is obvious that the prices of imported essential items depend on interest rates offered by commercial banks as the importers have to open LCs. Therefore, when the interest rates come down the prices should also decrease," the Minister said.

He said a recent discussion on the economic policy presided over by Prime Minister Ranil Wickremesinghe highlighted the importance of encouraging commercial banks to further bring down their lending rates.

"Another measure we have taken is to stabilise the exchange rate. In that way we could eliminate another factor which influence prices as opposed to the period during 2000 and 2001when the depreciation of the rupee contributed to price increases.

The Government has been careful when effecting salary increases as that would eventually lead to price increases. All these factors were instrumental in preventing the inflation rate going up. We have been successful in our efforts due to proper financial management," Minister Gunawardana said.

Most importantly we did not pass on the burden of increased kerosene and diesel prices in the international market to consumers. The Government has to bear the cost of about Rs. One billion rupees lost to the Ceylon Petroleum Corporation due to the non effecting of price increases," the Minister said.

He said setting up Dedicated Economic Centres throughout the island would ensure that the prices of vegetables and other food items will remain within reach of the consumers.

"One of the main problems we encounter in reducing vegetable prices is the influence of the middlemen. By setting up more Dedicated Economic Centres consumers will be able to buy these items at the whole sale price. The first such Centres in Meegoda and Thambuttegama have proved to be successful and therefore we have already made arrangements to set up more Centres in every part of the island," Minister Gunawardana said

He said more Dedicated Economic Centres will be set up in Ratmalana, Piliyandala, Welisara, Kadawatha and Gampaha during the next three months.

CBSL's Director of Economic Research Department Dr. A.G Karunasena said that the Government has been able to increase the productivity of vital state sector institutions such as the Ceylon Petroleum Corporation (CPC) and the Ceylon Electricity Board and it has contributed to the Government's efforts to ensure economic growth.

The Co-operative Wholesale Establishment (CWE) Chairman Lal Wickrematunge said the CWE was able to maintain reasonable price levels for most consumer items by reducing the price gap between producers and consumers.

"The CWE buys vegetables and fruits from collecting centres offering reasonable prices to the farmers. We do not act as a middleman and we do not have a monopoly. We have been able to increase the profitability of the CWE while providing this service," Wickrematunge said.

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