Sri Lanka lifts import limits on 286 items as crisis eases

COLOMBO: Sri Lanka lifted import restrictions on 286 items, the Finance Ministry said on Saturday, a fresh sign the South Asian nation is starting to emerge from its worst economic crisis in decades.

The island off India's southern coast plunged into crisis last year as its foreign exchange reserves ran out. The government limited imports on more than 3,200 items, including seafood, electronics, and even musical instruments.

Its fortunes have improved over the past nine months as Sri Lanka secured a $2.9 billion bailout from the International Monetary Fund (IMF), moderated its once-soaring inflation and embarked on rebuilding its foreign exchange reserves.

Sri Lanka's reserves grew 26% to a 17-month high of $3.5 billion in May, helped by stronger remittances and tourism earnings.The currency has risen about 24% this year, central bank data showed.

"With the economy stabilising, import restrictions on

286 items have been lifted from Friday midnight," the Finance Ministry said in a statement.

Restrictions on 928 items will continue, including vehicle imports, which were banned in March 2020, the statement said.

Minister of Finance Shehan Semasinghe said the relaxation of the restriction will send a strong signal that Sri Lnaka’s economy is open for business and that the country is “back on track”.

“This will infuse the economy and mitigate inflationary effects further and enhance price stability,” he said.

“Imported goods can help moderate prices by providing consumers with options and lower-cost alternatives.

We expect the pricing advantage will be passed on to the consumers as fast as possible.

“However, we need to be mindful of the impact on the foreign reserves, exchange rate, balance of payment and mitigate impact on local industries.

The government expects every importer to act with responsibility to ensure sustainable growth of the economy,” he said.

A wide range of items from railway carriages to radio broadcasting receivers are included in the latest list released from restrictions.

Sri Lanka will also slash prices of 60 essential drugs by 16 percent from this week.

Despite the easing of the crisis, the country still needs to complete debt talks with creditors by September, in time for its first IMF programme review, and implement key economic reforms to put its recovery on a sustainable path.

The IMF expects Sri Lanka's economy to shrink about 3 percent this year after a 7.8 percent contraction last year, but the government forecasts a return to growth next year.