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"Orders to break out? Dawn after bankruptcy! This South Asian country, lift import restrictions on 286 items!"
Jun 15,2023
According to foreign media reports, Sri Lanka's Ministry of Finance said on Saturday that it had lifted import restrictions on 286 items. It is a new sign that the South Asian nation is beginning to emerge from its worst economic crisis in decades.
On the 10th, Sri Lanka's Ministry of Finance announced that due to the gradual stabilization of the domestic economy, import restrictions on 286 items will be lifted, but import restrictions on another 928 items will continue.
Sri Lanka's Ministry of Finance said in a statement that the 286 items subject to the lifting of import restrictions include train cars and radios. However, restrictions on imports of 928 other items, including automobiles, will remain in place.
Last year, Sri Lanka plunged into its worst economic crisis since independence in 1948 as foreign exchange reserves plummeted, leading to a severe shortage of necessities and mass protests.
The government then restricted imports of more than 3200 commodities, including seafood, electronics and even musical instruments.
Sri Lanka's fortunes have improved over the past nine months as it received a $2.9 billion m bailout from the International Monetary Fund, eased once-soaring inflation and began rebuilding its foreign exchange reserves.
Sri Lanka's reserves rose an impressive 26 percent in May to $0.722 billion, according to the country's central bank, while the currency has also risen 24 percent this year.
The International Monetary Fund expects Sri Lanka's economy to contract by about 3 percent this year after contracting 7.8 percent last year, but the government forecasts a return to growth next year.
10 local time, the Ministry of Finance said in a statement: "As the economy stabilizes, the import restrictions on 286 items were lifted from midnight on Friday." The restrictions will continue to be imposed on 928 items, including car imports that were banned in March 2020, the statement said.
"Imported goods can help moderate prices by providing consumers with choice and lower-cost alternatives," said Shehan Semasinghe, state minister at the Ministry of Finance."
In August last year, Sri Lanka banned imports of 300 consumer goods such as chocolates, perfumes and shampoos in a bid to address its economic woes. The newly published list of restrictions includes everything from railway carriages to radio broadcast receivers.
According to the Indian High Commission, New Delhi has extended credit lines worth more than $4 billion to Colombo, Sri Lanka's commercial capital, across a number of sectors, including essential supplies, oil, fertilizers, railway development, infrastructure, defense sector and renewable energy.
"This is a new sign that the South Asian nation is beginning to emerge from its worst economic crisis in decades." Reuters reported on the 10th.
At the same time, thanks to the increase in foreign labor remittances and tourism income, Sri Lanka's foreign exchange reserves increased by 26% to 3.5 billion US dollars in May, the highest in 17 months.
Sri Lanka's main imports from China are mechanical and electrical products, textiles and raw materials, and base metals and products.
Sri Lanka's economic crisis erupted in the spring of 2022, with depleted foreign exchange reserves and high food and energy prices triggering political turmoil.
Sri Lanka, struggling for months with soaring prices and depleted supplies, officially "went bankrupt" with the announcement of Prime Minister Ranil Wickremashinghe ".
The then President and Prime Minister resigned. The new government took office in July last year, took measures to curb the economic crisis and sought international assistance.
Inflation began to fall, government revenues rebounded and the debt situation eased.
On 1 June 2023, the Central Bank of Sri Lanka announced a 250 basis point reduction in deposit and lending rates, respectively. This is the country's first interest rate cut in three years and is seen as a sign that the country's economy is beginning to recover from the crisis.
Tough fiscal controls, improved foreign exchange earnings and the help of the International Monetary Fund program have slowed inflation faster than expected.
Sri Lanka's central bank announced a 250 basis point reduction in the standing loan facility rate and the standing deposit facility rate to 14 per cent and 13 per cent, respectively, in the hope of stimulating the economy to rebound from the historic contraction in 2022 and reducing pressure on financial markets.
The central bank said Sri Lanka's overall inflation rate fell from 35.3 per cent in April to 25.2 per cent in May and is expected to fall below 10 per cent in the third quarter.
Debt-ridden Sri Lanka, which declared bankruptcy last year, is showing signs of economic improvement but its recovery still faces challenges, the IMF said Friday.
Sri Lanka's foreign debt exceeds $51 billion, of which $28 billion must be repaid by 2027. Sri Lanka has now started talks with creditors on debt restructuring.
Unsustainable debt, a severe balance-of-payments crisis, combined with the lingering scars of the COVID-19 pandemic, coupled with the Government's insistence on spending scarce foreign exchange reserves to prop up the Sri Lankan rupee, have led to acute shortages of foreign currency and necessities such as fuel, medicine, cooking gas and food.
While there have been some signs of progress under current President Ranil Wickremesinghe-shortages have been reduced and day-to-day functions restored-the government is still struggling to find funds to pay employees and perform other administrative functions.
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