ECONOMYNEXT – Sri Lanka is contemplating power imports and tariff reforms as a part of efforts to handle a 44 p.c tariff imposed on the island by US President Donald Trump, Deputy Financial Minister Anil Jayantha stated.
Power is likely one of the largest imports of the nation, the place a big change may very well be proven.
Sri Lanka had two digital assembly with US officers earlier than the Trump tariffs was paused.
Although US doesn’t interact in government-to-government transactions, and doable personal corporations that Sri Lanka might work with can be indicated.
Sending a negotiation mission as quickly as practicable to debate particulars both in Washington or Colombo was additionally mentioned, Minister Jayantha stated.
President Anura Kumara Dissanayake had written to President Trump. The Treasury had additionally submitted a extra detailed doc to the workplace of the US Commerce Consultant and the White Home.
By way of tariffs, Sri Lanka’s highest price was 20 p.c, and a few items had been already at zero, Minister Fernando stated.
Sri Lanka nonetheless had so-called para tariffs, involving CESS and Port and Airport Levy.
Sri Lanka’s so-called ‘de-liberalization journey’ started in November 2004 with a gazette with 25 pages stuffed merchandise slapping taxes at midnight with out parliamentary approval, within the model of a Trump govt order.
The fateful gazette then led to the rise of protectionist oligarchs, who had been capable of block free commerce agreements, by financing politicians, critics say.
Sri Lanka has a historical past of macro-economists chopping charges or re-financing financial institution credit score. When foreign exchange shortages emerge macro-economists – together with within the Treasury who’re often seconded from the central financial institution – then persuade politicians into imposing commerce or change controls upon the folks.
The workplace of the US Commerce Consultant on the time identified that Sri Lanka had reversed course, and was happening a path of self-sufficiency.
In contrast to now US coverage on the time was towards international free commerce, and mutual prosperity by empowering the buyer sovereignty of the poorest citizen towards protectionist enterprise pursuits.
“The federal government’s Financial Coverage Framework has backtracked on the earlier authorities’s commerce liberalization technique,” a USTR report pointed in 2005.
“It particularly calls for defense of small and medium enterprises and agriculture.”
“[D]eparting from the earlier liberalization path, the Sri Lankan authorities imposed a brand new import tax on chosen gadgets by the use of a levy (known as a “cess” in Sri Lanka) in mild of a decline in international reserves.
“The federal government additionally hopes this new tax will defend home agriculture and business. Regardless of an enchancment within the international reserve place, the federal government has not revoked the tax.”
The protectionism later led to the promotion of protein malnutrition by severely controlling maize imports to drive up rooster and egg costs, in response to critics. Stunning taxes had been imposed on diary merchandise to assist one firm.
The maize controls had been initiated with the political institution by a collector who was blacklisted by a high poultry agency for overpricing maize, in response to insiders who know the origins of maize protectionism.
In subsequent years the USTR continued to level out taxes imposed on apparels and meals merchandise.
Underneath the so-called Yahapalana period, as cash printed via open market operations for versatile inflation focusing on led to foreign exchange shortages, the USTR highlighted additional controls.
Paradoxically, versatile inflation focusing on and ‘knowledge pushed financial coverage’ which ends up in price cuts based mostly on backward trying previous 12-month inflation was promoted by the US-based Worldwide Financial Fund.
“When there have been stability of fee difficulties, the federal government has imposed controls on international change transactions,” the USTR report famous in 2017.
“In December 2015, the Sri Lankan authorities imposed a cap on automobile financing. Financing is restricted to not more than 50 p.c of the worth of the automobile for vehicles (90 p.c of the worth for electrical autos) and 70 p.c for buses.”
The USTR additionally highlighted worth controls of the Nationwide Medical Regulatory Authority which successfully blocks larger priced US branded medicine even when customers wished them.
USTR had additionally highlighted taxes on apparels up to now and likewise the apply of Sri Lanka customs imposing valued added tax on a ten p.c additional imputed worth. (Colombo/Apr12/2025)
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