Sri Lanka will lift import restrictions on all items from September this year, said State Minister of finance Shehan Semasinghe at the ‘Invest Sri Lanka’ forum in Chennai on Wednesday.
The State minister however said the import restrictions on motor vehicles would remain. He said that with prudent economic management Sri Lanka from a country that had the highest information rate in Asia of 70% in one year had made a dramatic turnaround with inflation coming down to less than 7%. Similarly the foreign reserves which were around zero percent has now improved to near USD 4 billion.
Due to these positive economic developments the government has now decided to remove all import restrictions. “As and when the foreign reserves increase and more FDI and foreign receipts come to Sri Lanka we will re look at vehicle imports again.”
The State Minister said that they had identified that one reason for Sri Lanka to face its largest economic crisis, a year ago, was its high foreign debt. ” We have learnt lessons and steps have been taken never to repeat this. The country is now looking to minimise borrowings and be a no debt country.”
Towards this we will look at an increase in FDI, tourism and foreign remittance revenue and increased exports revenue in the future.” Fiscal weakness has also been a primary driver of macroeconomic volatility in Sri Lanka. Persistent budget deficits due to weak government revenue generation, contributed to public debt reaching unsustainable levels.
“To address this the government implemented major tax reform that enhanced tax rates in a progressive manner, yielding a 37% growth in tax revenue in the first 4 months of this year. Sri Lanka is also addressing long neglected vulnerabilities in State owned enterprises and the government is in the process of restructuring many of them.”
With competition being introduced in petroleum retail and unbundling of the electricity monopoly, these gains are expected to be locked in over the long term. Whilst there remains a long way to go, today Sri Lanka has the chance of becoming the foster child for recovery from a sovereign debt crisis. He also said that a new Central Bank Act and several other key legislation have been already introduced, such as the Parliamentary Budget Office and Anti Corruption Law to enhance independence, transparency and good governance.
“This sets up an enticing opportunity for investors to obtain first mover advantage in a market that is primed for a sustained, high quality growth over the medium to long term.”
Semasinghe at the forum acknowledged and valued India’s substantial support to the Sri Lankan economy last year, in the form of credit lines for fuel and other essential imports, reserve swaps, and extensions of ACU liabilities.
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