Import ban likely to stay as economy strangles by virus related restrictions

The ban imposed on non-essential imports is likely to remain longer than it was initially anticipated as the country battles a slowing economy, with mounting job losses, loss in livelihoods and personal incomes amid spike in COVID-19 cases and resultant restrictions. 

The Central Bank indicated that they have no intention to either lift or relax the current suspension in place on non-essential imports as they see the economic readings turning dour, with the increasing restrictions on the economic activities.  “The continuation of existing restrictions on non-essential imports and selected foreign exchange  outflows is expected to help ease the pressure on the domestic foreign exchange market,” the Central Bank said. 

Meanwhile, the Central Bank forecasted that there could be some slowdown in the demand for Sri Lanka’s merchandise exports in the near term as they observe languishing global demand for goods and services, making matters worse and which in turn could lead to more time before any relaxation in imports to happen.

Worker remittances and merchandise exports remained the only two bright spots in the country’s external sector as tourism which has the potential to generate over US$ 4.5 billion has been in doldrums since March last year, while direct investment flows typically take more time to materialise, forcing the country to rely on foreign borrowings. 

 There were growing calls for some relaxation in imports leading up to the New Year as the economy was recovering fast from the shackles the authorities previously put in place last year as certain industries which directly depended on imports were going out of business, while several thousands of people who were employed in these industries were losing jobs.

Meanwhile, the biggest losers of these prolonged import controls are the hapless consumers who are forced to pay, sometimes more than double the price for these commodities which are in short supply, making a fertile ground for the oligarchs and rogue traders to make thumping profits. 

Both the import-dependent industries and consumers tolerated these controls on imports during the worst of the economic crisis last year expecting that they would be gradually eased with the recovery in the economy. However, the authorities are again confronted with a man-made economic calamity which is now in the making, as myopic decisions by a few bureaucrats are making matters worse for everyone. Mirror Business earlier this week showed that Sri Lankans are now paying nearly 50 percent more for coconut oil as the government banned palm oil imports creating a shortage in the market. The government’s policy on import substitution and re-building a domestic production based economy has fallen flat on their faces as people are paying exorbitantly higher prices even for the commodities which have record domestic supply. Rice remains a case in point.    While import dependent industries suffer, domestic industries also remain hamstrung due to bad decisions by authorities to clamp down on consumption and other economic activities putting thousands out of jobs and thereby their incomes.