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Foreign trade order recovery? The country has lifted import restrictions on 286 items! Recently, the Ministry of Finance of Sri Lanka announced the lifting of import restrictions on 286 items due to the gradual stabilization of the domestic economy. This is a new sign that this South Asian country is starting to emerge from the most severe economic crisis in decades.

Remove import restrictions on train carriages, radios, and other items

Reuters reported on the 10th that Sri Lanka has lifted import restrictions on 286 goods since the early morning of the 9th, but will continue to impose restrictions on 928 goods, including the ban on car imports starting from March 2020.

The Sri Lankan Ministry of Finance stated in a statement that 286 items that have lifted import restrictions include electronic products, food, wooden materials, sanitary ware, train carriages, and radios.

State Secretary of the Ministry of Finance, Shehan Semasinghe, said, "Imported goods can help alleviate prices by providing consumers with choices and lower cost alternatives

Last year, Sri Lanka fell into its most severe economic crisis since independence in 1948, due to a sharp decline in foreign exchange reserves, leading to a severe shortage of essential goods and triggering large-scale protests among the public.

The government immediately restricted the import of over 3200 goods, including seafood, electronic products, and even musical instruments.

China is Sri Lanka's largest source of imports. In 2022, the total amount of foreign trade orders between China and Sri Lanka was 4.25 billion US dollars. The main commodities exported by China to Sri Lanka are chemicals, electronic equipment, knitted goods, and metal products. The main products imported by China from Sri Lanka include fuel, tea, jewelry, and fiber fabrics.

The economy is' getting back on track '

Sri Lanka experienced an economic crisis in the spring of 2022, leading to the depletion of foreign exchange reserves and high food and energy prices, causing political turmoil. The then President and Prime Minister resigned. The new government took office in July last year, taking measures to contain the economic crisis and seeking international assistance.

Sri Lanka's fate has improved in the past few months as it received a $2.9 billion bailout from the International Monetary Fund (IMF), eased the once soaring inflation and embarked on rebuilding its foreign exchange reserves.

At present, the inflation rate of Sri Lankan cartoons has begun to decline, government revenue has rebounded, and the debt situation has also eased.

Central Bank Governor Nandalar Villasinha said that foreign trade orders are "getting back on track", but he emphasized that "recovering from the crisis is a gradual process" and cannot be achieved overnight.

According to data released by the Bureau of Statistics, Sri Lanka's main inflation rate decreased from 50.3% in March to 35.3% in April, indicating a relief for the crisis hit economy. Among them, the food inflation rate decreased from 47.6% in March to 30.6% in April, while the non food inflation rate reached 37.6%.

In addition, Sri Lanka's official foreign exchange reserves in May were $3.483 billion, an increase of 26.2% from April's $2.761 billion and a 17 month high. Moreover, the currency has also risen by 24% this year.

Reuters quoted analysts as reporting that the Sri Lankan central bank has successfully curbed the trend of soaring inflation and begun to shift its focus to stimulating economic growth.

Recovery still faces challenges

On June 1st of this year, the Sri Lankan central bank announced a reduction in interest rates, marking the first time the island country had declared bankruptcy last year and was seen by the outside world as a sign that the country's economy was beginning to recover from the crisis.

The central bank announced a 250 basis point reduction in the standing loan facility interest rate and the standing deposit facility interest rate to 14% and 13%, respectively, in the hope of "stimulating the economy to rebound from the historic contraction activity that occurred in 2022 while reducing pressure on the financial market".

The Bank of Sri Lanka predicts that Economy of Sri Lanka's economy, which will shrink by about 8% in 2022, will gradually recover in the second half of 2023 and maintain its growth momentum.

According to a recent study by the Central Bank, Sri Lanka's GDP grew by 3.6% in the first quarter of 2023, which is attributed to various factors, including an increase in industrial production and an increase in demand for foreign trade orders and exports. Especially with the rapid growth of the manufacturing industry, production increased by 6.9% in the first quarter of 2023, and the agricultural sector also performed well. Tea and rubber exports increased significantly, and the tourism industry rebounded.

However, the IMF recently stated that Sri Lanka, which declared bankruptcy last year and is burdened with debt, is showing signs of economic improvement, but the recovery of foreign trade orders still faces challenges.

Unsustainable debt, serious balance of payments crisis, the lingering scars of the COVID-19 pandemic, and the government's insistence on spending scarce foreign exchange reserves to support the Sri Lankan rupee have led to a serious shortage of foreign exchange and fuel, medicine, cooking gas, food and other necessities The road to economic recovery in Sri Lanka remains difficult. (Translated from: China Trade News)