Sri Lanka limits imports of 367 non-essential items

Reuters: Sri Lanka has limited imports of 367 non-essential items, including fish, footwear, and wine, the finance ministry said on Wednesday as the South Asian country attempts to tackle its worst financial crisis in years.

In a gazette notification, the ministry said the limits on imports will come into effect from midnight on Wednesday though valid license holders will still be able to import these items.

Sri Lanka is battling a severe foreign exchange crunch with official reserves having dipped to $2.36 billion as of end- January, and the government is due to repay debt of about $4 billion in the remainder of this year.

Sri Lanka has initiated multiple rounds of import restrictions on motor vehicles, ceramic items and mobile phones since March 2020 to reduce pressure on limited reserves.

The Central Bank of Sri Lanka has appealed to the government to curb non-essential imports to encourage banks to prioritise essentials such as fuel and medicines.

“This will impact exporters and create more distortions in the market,” warned Dhanannath Fernando, analyst for Colombo based think tank Advocata Institute.

“The government cannot decide what is essential and what is non-essential. There are so many industries that need these items and they provide livelihoods as well. Imports are not the problem. If there are excessive imports it’s better to manage that through the exchange rate.”

On Monday, CBSL relaxed the unofficial peg on the rupee to 230 per dollar from around 200 to 203 where it has been held since October. 

Sri Lanka’s imports rose by 28.5% to $20.6 billion in 2021 with the largest expenditure of $1.2 billion made on fuel.

Higher global commodity prices and supply issues have pushed Sri Lanka’s inflation to 16.1% in February, among the highest rates in Asia.