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Scientific, not knee-jerk, restrictions on imports

26 Aug 2022

Before people could come to terms with the almost 300% price increase of kerosene oil, President Ranil Wickremesinghe, in his capacity as the Minister of Finance, temporarily suspended the importation of over 300 items with effect from Tuesday (23). This decision raised concerns about the future of several economic crisis-hit industries and is expected to worsen the local market in the coming few months, as the list of the 300 items includes a number of goods used in everyday life. Given the state of the country’s foreign reserves and diminished foreign currency income, it is not fair to say that import restrictions are not an effective, short-term step to save foreign reserves. In fact, after the state of foreign reserves became a topic of discussion during the peak of the Covid-19 pandemic last year, it was revealed that Sri Lanka has been importing a large number of not-so-essential goods, some of which are being produced locally at a much lower cost. However, all this time, only one side of the problem – the cost of importation – received adequate attention, and successive governments did not do enough to address the most important aspect of this issue, which was the need to empower domestic industries to produce imported goods or alternative goods. That is what would have truly helped the Government’s plan to free Sri Lanka's markets from imported items that could be produced locally. This concern has been raised by some industries that are most likely to be affected by the recent import restrictions, who have questioned the Government about its plans to produce certain materials for which the importation has been restricted. To cushion the impacts of import restrictions, the Government should urgently pay attention to local industries. Its first step should be looking into the possibility of facilitating the sourcing of the restricted goods or substitutes for industries that are affected by the latest restrictions. Secondly, it should pay serious attention to supporting local producers by increasing the quality and quantity of their products. What is more, in the medium and long term, the Government should have a national policy to restrict or halt the importation of goods that can be produced locally in line with internationally accepted standards. Essentially, import restrictions should be a process driven by the goal of making Sri Lanka a self-sufficient country, rather than by the need to save foreign reserves. Therefore, it has to be implemented gradually, without destroying local and export industries in the process.  The Government has to smoothen this shift. Unlike the previous Government under the Rajapaksa brothers (former President Gotabaya Rajapaksa and former Prime Minister Mahinda Rajapaksa), the incumbent Government under Wickremesinghe has already taken stringent measures to restore the economy and to slow down the economic decline, and the people have been asked – or rather, cautioned, to be precise – to tighten their belts. However, while taking economic policy decisions several previous governments did not dare to is a good move in the right direction, the Government has to go beyond merely telling the people to be prepared for the impacts of those decisions; it has to make the effort to help them prepare.  The failure to do so will result in many industries collapsing. Not taking immediate action to help local industries source goods from local producers will only speed up this collapse – spelling further disaster for a country with a severely weakened economy.  


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