Commenting exclusively to Libya Herald yesterday on last week’s article on price increases in Libya, leading Libyan businessman, Husni Bey said ‘‘It all comes down to government mismanagement, wrong and or distortionist economic and monetary policies. The fundamental rule of pricing equilibrium is supply and demand.’’
It will be recalled that there was a public outrage (on social media at least) last week as prices of foodstuffs rose sharply, including bread. This was blamed on the Ukraine war and world markets externally, and the battle for the prime ministership domestically.
‘‘Government interference in this basic rule causes distortions and leads to imbalances and distortions. The Russian war on Ukraine broke out, it is normal for markets to react, and it is better to let market forces find their equilibrium.
Instead, our government decided to fix prices for major commodities, and to seal and shut warehouses of whoever was found selling above the imposed pricing.
This caused two reactions:
First: Importers stopped importing as the imposed government prices are below cost.
Secondly: The supply decreased as many traders preferred to close their warehouse rather than having their premises sealed and shut by the authorities. These factors combined reduced the supply and the fear caused a sharp increase in demand.
Hence ironically, the government’s actions in attempting to fix market prices itself resulted in an end result of distorted high prices.’’, concluded businessman Husni Bey.
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