CB says import controls in line with World Trade Organisation rules

• Points out WTO rules provide flexibility to address BOP issues 
• Recent EU statement expressed displeasure over SL’s import controls
• Maintains import controls have minimum impact on imports from EU
• SL currently maintains a healthy trade surplus with EU and US

Defending the temporary import restrictions imposed by the government, the Central Bank (CB) stressed that the restrictions are in line with the World Trade Organisation (WTO) rules.

Responding to a recent statement of the Delegation of the European Union (EU), CB Governor Prof. W.D. Lakshman said that there is flexibility to address the balance of payment (BOP) issues under the WTO and asserted that Sri Lanka hasn’t acted outside of these WTO rules.

Issuing a statement after the Sri Lankan government presented its 2021 budget, the EU together with the Embassies of France, Germany, Italy, the Netherlands, Romania and EU stressed that trade is not a one-way street.

“Trade, however, is not a one-way street. The current import restrictions are having a negative impact on Sri Lankan and European businesses and on foreign direct investment. Such measures impair Sri Lanka’s efforts to become a regional hub and negatively impact Sri Lankan exports by constraining the import of raw material and machinery. We recall that a prolonged import ban is not in line with the World Trade Organisation regulations,” the statement added.

However, Prof. Lakshman termed the statement as an overreaction and premature.

He reasoned that Sri Lanka has imposed import restrictions only for the short term and in order to meet the debt repayments while overcoming the BOP issues. 

Meanwhile, CB Director Economic Research Dr. Chandranath Amarasekera opined that import restrictions have only a minimum impact on imports from the EU while noting import controls have been mostly slapped on non-essential goods such as motor vehicles and some agricultural products. 

He noted that Sri Lanka would be able to save US $ 4 billion in foreign exchange outflows, due to reduced imports seen so far during the year, which has been partly contributed by import controls.

Sri Lanka currently enjoys a significant trade surplus with the EU.

Amarasekera said that the country is focusing on narrowing the trade deficit with Asian countries while maintaining trade surpluses with the EU and United States.