ECONOMYNEXT – Over a period of five years, Sri Lanka spent less than one percent of its import bill on the 327 goods on which import restrictions were recently lifted, an official said. State Minister of Finance Ranjith Siyambalapitiya told reporters on Thursday August 03 that a further 300 items will see their import restrictions lifted in September.

“We’re always talking about negative growth. For economic growth to be positive, for the economy to expand, a country needs free trade, particular free international trade,” said Siyambalapitiya.

In early July, Central Bank Governor Nandalal Weerasinghe said the bank has recommended the relaxation of import controls on 900 items except motor vehicles,

“The decision on how to relax, when to relax, phasing out is a decision of the Finance Minister,” Governor Weerasinghe said speaking to reporters on July 06 after cutting policy rates.

“We have recommended to relax about 900 [items] (sp).”

About 300 items will remain under import controls, made up of motor vehicles and some other items, he said. Relaxing import control will also boost tax revenues, said Weerasinghe.

Under an International Monetary Fund (IMF) programme, June targets were met except for revenues because import duties were much lower than expected.

“That is why we have recommended to the government to relax the import restriction so that we can collect some revenues as well,” Governor Weerasinghe said.

Sri Lanka controlled the imports of over 3,000 items in 2020 after the deployment of macro-economic policy in the form of rate cuts on top of tax cuts blew a hole in the balance of payments.In Sri Lanka imports are controlled after money printing (rate cuts or central bank refinance) trigger forex shortages, further worsening tax collections.

State Minister of Finance Shehan Semasinghe tweeted on June 10 that the relaxation of the restriction will send a strong signal that Sri Lnaka’s economy is open for business and that the country is “back on track”.

“This will infuse the economy and mitigate inflationary effects further and enhance price stability,” he said.

“Imported goods can help moderate prices by providing consumers with options and lower-cost alternatives. We expect the pricing advantage will be passed on to the consumers as fast as possible.

“However, we need to be mindful of the impact on the foreign reserves, exchange rate, balance of payment and mitigate impact on local industries. The government expects every importer to act with responsibility to ensure sustainable growth of the economy,” he said.