- Thursday, April 24, 2025
The finance ministry had recently lifted import restrictions on 286 items, but the country’s economy contracted by 11.5 per cent in the first quarter of 2023 compared to the previous year.
By: India Weekly Staff
A SRI LANKAN minister has said the country cannot afford to resume vehicle imports due to the acute shortage of US dollars. The decision comes as the government recently lifted import restrictions on nearly 300 items in an attempt to address the cash-strapped situation.
Ranjith Siyambalapitiya, the state minister of finance, explained that the exchange rate of the US dollar is now determined by supply and demand, and the country cannot deplete its reserves to stabilise the dollar rate. While there were initial indications that vehicle imports might resume to boost tax collection, the situation became more complicated when the government had to spend around $80 million (£62.3 million) to import fuel last week.
Considering the impact of such expenditures, Siyambalapitiya emphasised the need for a comprehensive study before allowing vehicle imports, as they consume a significant volume of dollars. Sri Lanka is currently recovering from a major economic crisis, and decisions should be made after a thorough examination of their impact on the entire economy.
The finance ministry had recently lifted import restrictions on 286 items, but the country’s economy contracted by 11.5 per cent in the first quarter of 2023 compared to the previous year. While the agricultural sector saw slight growth of 0.8 per cent, the industry and service sectors experienced declines of 23.4 per cent and 5 per cent, respectively.
Last year, Sri Lanka faced its worst economic crisis in its history, marked by plummeting foreign exchange reserves, shortages of essential items, and widespread protests. In April 2022, the country declared an international debt default due to the foreign exchange crisis. In March of this year, Sri Lanka secured a $3 billion (£2.3 billion) bailout package from the International Monetary Fund. The country is now focused on completing debt restructuring talks with its major creditors, including China, India, and Japan, and implementing key economic reforms ahead of the first IMF review scheduled for September.
India has been providing multiple forms of assistance to Sri Lanka during its economic and humanitarian crisis, aligning with its “Neighbourhood First” policy and as a reliable friend and partner. The financial crisis in 2022 also led to political turmoil, resulting in the removal of the powerful Rajapaksa family from office.
(With agency inputs)
