New import curbs tip of the iceberg, say economists

Import restrictions on 367 items from milk products, butter, cheese, chocolates, apples grapes, whisky to cosmetics, kitchen appliances, toys and some sports gear will disrupt the country’s economic growth potential, several economists and leading traders said.

Under the new regulations, these restricted items also include food products such as

fish, meat, fish fillets, milk and cream, buttermilk, curdled milk and cream, yogurt, and other fat and oil derived from milk; dairy spreads, curd, pears, oranges which the government considers as non essentials have been listed in three different categories.

Under the first category, duty would be imposed on certain selected imported items while the second category, permits (licences) are compulsory in importing certain goods. For the third category duty and permits are mandatory in importing several other goods.

The implementation of this system is impractical and it will create several administrative and procedural issues.

Discriminatory intervention, without adhering to the country’s administrative structure and official procedure of the country as a policy is going to be a recipe for disaster, a senior economist said.

He emphasised the need of introducing trade reforms simplifying the current import tax structure rather than restricting imports.

Sri Lanka cannot achieve economic growth without joining global production networks through trade, he added.

Analysing the implications of restricting selected number of imports into the country at a time of a foreign exchange shortage, several eminent economists said that the current economic crisis emerged following the dollar shortage and debt servicing issue and these cannot be solved by these patchwork solutions.

Prof. Sirimal Abeyratne, Department of Economics, Colombo University told the Business Times that no one can understand as to how the government and the policy makers decide on essential and non essential items under the present economic situation.

“How can the policy makers decide what is essential and what is non-essential,” he asked adding that there are many items in the list of restricted goods which are essential for the people. The survival of certain traders, industrialists and businessmen depends on some of these items and the action to restrict it will affect their livelihoods.

On the other hand introducing a licence scheme for the imports of certain items under one of those categories will become an issue due to bureaucratic red tape, political interference and favouritism.

This will be beneficial for those who have political connections and create favouritism, he said adding that a similar situation prevailed in the period of the 1970s closed-economy period.

The Government will have to find a solution to the problem of gaining the support of international lending agencies and the confidence of international community in finding foreign exchange to repay debts and import essential commodities, a leading importer said. This problem cannot be solved by restricting 367 items including grapes and apples, he added.