The lifting of import restrictions to support trade is a welcome move but it would not help the country in the long run unless measures are taken to promote and build local industries that could bring in the much needed foreign exchange through exports said Pettah Business Association Secretary Chaminda Vidanagamage told the Sunday Observer Business last week. He said encouraging imports is only a short term measure that would lead the economy again to a foreign exchange crisis.
Over dependence on imports without a shift to local manufacture will always result in having a forex problem at our door, said Vidanagamage, a proponent of developing local industries that are oriented towards exports. Sri Lanka has been facing an acute shortage of foreign exchange to meet import demand and keep the economy afloat. Foreign reserves shrank to USD 2 billion a couple of months ago, hardly sufficient to meet two months of imports.
According to Central Bank Governor Ajith Nivrad Cabraal the country has met all foreign debt obligations having paid over USD 6 billion in 2020 and around USD 5.5 billion this year and would continue to meet future debt obligations without failure.
Cabraal said that doomsday predictors look at only the amount of foreign reserves in debt management discounting the inflows to the country.
However, rating agencies have been sounding alarm on Sri Lanka’s external debt repayment ability as foreign reserves plummeted to around USD 3.6 billion at end June this year which the agency was of the view it was inadequate to cover the annual external debt servicing of $4 billion to $5 billion over the next four to five years.
Given the dire state of the economy, Vidanagamage said people need to make sacrifices to support the country at a time of need. The import restriction to tide over rough times was a good move to save the country from a foreign exchange crisis, Vidanagamage said, adding that too would not be a viable move as no country is an island that could totally be self-sufficient.
Imports for value added exports should be encouraged, he said.