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Budget to decide future of import restrictions

14 Nov 2020

Relaxation for agriculture and confectionery this week? 

By Madhusha Thavapalakumar Budget 2021, which will be presented to Parliament on Tuesday (17), will determine the future of the prevailing stringent import restrictions that have proven to be highly controversial among economists and the general public. “Budget 2021 will decide whether to continue the import restrictions on to the next year or to relax them this year. I do not know anything as of now. We have to wait and see what the Budget holds for the import sector,” Minister of Trade Dr. Bandula Gunawardena told The Sunday Morning Business last week. However, in September, State Minister of Finance and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal told local media that import restrictions are a temporary measure to avoid a possible foreign exchange crisis in the country and that restrictions would be eased phase by phase when sufficient foreign exchange flows into the country. Cabraal added that the gradual easing of restrictions will be done in a manner that would not hurt local industries. [caption id="attachment_105094" align="alignleft" width="300"] Budget 2021 will be presented to Parliament on Tuesday by PM and Finance Minister Mahinda Rajapaksa[/caption] Meanwhile, the Chairman of the Import Section of the Ceylon Chamber of Commerce told us that discussions were held between importers and government authorities on this matter. “Primary focus when easing the restrictions gradually would be on foods like agricultural products and confectionaries,” the Chairman added.  However, despite import restrictions that have been in place since the initial local outbreak of the pandemic in March, several import categories recorded a growth during the first three quarters of this year, compared to the same period last year, and this includes dairy products, vegetables, and sugar and confectionery products. Their import expenses grew by 12.5%, 26.4%, and 40.6%, respectively. Commenting on this, the Import Section Chairman stated the main reason was that imports came into the country before the import restrictions were captured later into the statistics. The next reason provided was that when there was some leeway given after the lifting of the initial lockdown, importers imported more than usual. Nevertheless, he added that these products are still under import restrictions. Speaking further, the Chairman said that import restrictions as a whole should be lifted and free trade should be allowed as the impact on importers is significant. “I do not think the Government looked at the total impact of import restrictions on the country. It has not been objectively looked at. They should lift it completely and provide us some sort of a licence or permit to import so the Government would have an advanced idea on import expenditures,” the Chairman noted. Sri Lanka introduced import restrictions initially on nonessential imports in late March, which was later expanded to all imports excluding fuel and pharmaceutical products and subsequently, raw material required for export purposes and construction materials too were exempted. Nevertheless, certain food and beverage category products were allowed to be imported during that time. Following this, on 15 April, the Government announced import restrictions on items such as rice, flour, sugar, liquor, and apparel products, extending restrictions to 15 July which was once again extended until further notice. However, apparel imports are now permitted with a high cess per kilogramme.   

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