Analysis of the Impact of the Repeal of S.I. 81A

S.I. 81A of 2024 introduced a pricing regulation that compelled sellers to peg goods and services to the average interbank exchange rate, penalizing deviance (usually parallel market). The Government gazetted S.I. 34 of 2025, which repeals S.I. 81A of 2024, liberalizing the exchange rate to a more market-driven one and amputating the pricing constraint.

The repeal reopens pricing flexibility for businesses, shifting the balance back toward market-driven pricing mechanisms, hence providing fair competition for all. Businesses regain control over pricing models and now compete based on productivity and efficiency instead of exchange rate differentials.

Given the shortage of foreign currency on the interbank market, those companies accessing the foreign currency at the parallel exchange rates are given the flexibility to charge reflective prices towards the achievement of a market-determined rate. This also allows firms to realign prices to operational realities, improving profitability and sustainability. The repeal also enhances supply chain responsiveness as firms no longer absorb exchange rate losses. On the other hand, this may lead to the reintroduction of inconsistent pricing practices across sectors, leading to market fragmentation, and consumers are likely to be exposed to price distortions from foreign exchange volatility.

The repeal fosters a price discovery mechanism, allowing differentiation through innovation, service quality, and efficiency – not just compliance. A shift from price-controlled competitiveness to value-based competition is enhanced. However, safeguards preventing sellers from using speculative exchange rates to exploit consumers are lifted; hence, the risk of a return to hyperinflationary behaviors if sellers begin the usually aggressive speculative pricing again.

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Analysis of the Impact of the Repeal of S.I. 81A of 2024