Import Restrictions Saved Sri Lanka $1.7 billion During Forex Crisis: State Finance Minister

Sri Lanka saved nearly USD 1.7 billion by restricting imports during the ongoing economic crisis caused by forex shortages, State Minister of Finance Ranjith Siyambalapitiya informed Parliament on Tuesday.
     
Siyambalapitiya said that by 2022, USD 1.6 billion had been saved, while USD 1.95 billion were spent on imports in 2019.
     
Cash-strapped Sri Lanka placed severe import restrictions covering 82 per cent of items to save foreign exchange reserves since early 2022. The import of items like chocolates, perfumes, and shampoos were banned to tackle the country's economic woes.
     
“Only 930 items are currently left under (the) restrictions,” Siyambalapitiya said as he announced the lifting of restrictions placed on 286 items through a gazette issued on Tuesday.
     
Siyambalapitiya said the government will soon implement its plan to increase state revenue.
     
The slump in the state revenue since 2020, caused by tax cuts, was seen as a key contributor to the island nation's economic crisis. In 2021 the country's tax-to-GDP ratio dropped to over 7 per cent.
     
Sri Lanka was hit by an unprecedented financial crisis in 2022, the worst since its independence from Britain in 1948, due to a severe paucity of foreign exchange reserves. 
     
The island nation, which declared its first-ever credit default in mid-April last year, secured a bailout of USD 2.9 billion from the IMF in March this year, spanning over four years subject to reforms being put in place. Last year, the government hiked personal and business taxes as part of the reforms linked to the IMF bailout.