price liberalisation

English Definition

The freeing of prices from state control to be determined by the market, a central step in the transformation of transition economies. The sequencing of price liberalisation is decisive: energy tariffs, being the most politically sensitive item, are typically left to last, and this ordering determines when merchant project revenues become cost-reflective and therefore bankable. For lenders the question is not whether liberalisation has been announced but whether it has been carried through irreversibly, since a partially liberalised tariff can be rolled back under political pressure and strand the revenue assumption the debt was sized against.