A senior Treasury official revealed that the government intends to lift import restrictions on another 800 items by December of this year.
Import restrictions on nearly 300 items were recently lifted. The additional restrictions are being implemented in accordance with an International Monetary Fund (IMF) target for Sri Lanka to gradually lift import restrictions while keeping the rupee depreciation in mind.
“We can’t keep these restrictions indefinitely,” the official said. He noted that the country’s foreign reserves now stand at USD 1.6 billion. It was a mere USD 200 million about a year ago. As part of efforts towards a gradual economic recovery, the IMF has given Sri Lanka a target to build the country’s foreign reserves by a further USD 1 billion by the end of the year, the official added.
According to the official, relaxing the vehicle import ban is not yet possible due to the damage it would cause to foreign reserves. The rupee dropped sharply earlier this week before recovering by Friday. State Finance Minister Ranjith Siyambalapitiya told the media that this was primarily due to the government spending between USD 75 and 80 million this week on fuel imports for the Ceylon Petroleum Corporation.
“For the moment, we will only lift import restrictions on items that will do the least amount of damage to our foreign reserves. We will not be removing restrictions on vehicle imports due to this reason. Once we restart vehicle imports, about USD 1.5 billion will be lost from our foreign reserves annually,” said the official.
With the vehicle import ban still in place, mega road development projects are the biggest drain on the country’s foreign reserves. Given the circumstances, the Treasury has halted all but the most critical of such projects until at least December.
Additionally, all projects that cost more than Rs 10 billion have also been suspended indefinitely. The Treasury official noted that the projects will remain on hold for the foreseeable future until debt restructuring – both foreign and domestic – has been completed, and the Government obtains a clear picture of how much it has to pay.
