Sri Lanka Thursday extended a ban on non-essential imports such as vehicles as it battles a foreign currency crisis, despite EU claims it violates international trade regulations.

The ban was announced by the finance ministry in March as the local currency plunged and the economy reeled from the impact of the coronavirus pandemic and last year's Easter Sunday bombings.

"The restrictions are primarily because of the difficult situation we are in (regarding balance of payments)," the central bank's economic research director Chandranath Amarasekara said.

"The import ban on high-value items like vehicles and agricultural produce will be extended for another year to save foreign exchange as well as to encourage local agriculture."

The government had said that the prohibition, which also covers spare parts, machinery and household appliances, would only last until the end of this year.

The ban has led to shortages of tyres as well as spices such as turmeric, a key ingredient in local cuisine.

The European Union said last week that the restrictions were having a negative impact on Sri Lankan and European businesses, and on foreign direct investment.

"Such measures impair Sri Lanka's efforts to become a regional hub and negatively impact Sri Lankan exports," the EU said in a statement.

"(A) prolonged import ban is not in line with World Trade Organization regulations."

But central bank governor W. D. Lakshman said the EU's comments were "an overreaction".

"At a time when we are trying to deal with a balance of payments problem, even WTO rules allow us to do certain things to meet the... challenge."

Sri Lanka's imports fell to $13.1 billion in January-October from $16.4 billion in the corresponding period last year.

The economy contracted by an unprecedented 1.7 percent in the first quarter of this year, after a 2.3 percent economic expansion last year.

Global ratings agency Moody's downgraded Sri Lanka's sovereign credit rating in September, saying the island nation could struggle to service its huge foreign debt.

aj/grk/mtp

Sri Lanka Thursday extended a ban on non-essential imports such as vehicles as it battles a foreign currency crisis, despite EU claims it violates international trade regulations.

Sri Lanka Thursday extended a ban on non-essential imports such as vehicles as it battles a foreign currency crisis, despite EU claims it violates international trade regulations. The ban was announced by the finance ministry in March as the local currency plunged and the economy reeled from the impact of the coronavirus pandemic and last year's Easter Sunday bombings. "The restrictions are primarily because of the difficult situation we are in (regarding balance of payments)," the central bank's economic research director Chandranath Amarasekara said. "The import ban on high-value items like vehicles and agricultural produce will be extended for another year to save foreign exchange as well as to encourage local agriculture." The government had said that the prohibition, which also covers spare parts, machinery and household appliances, would only last until the end of this year. The ban has led to shortages of tyres as well as spices such as turmeric, a key ingredient in local cuisine. The European Union said last week that the restrictions were having a negative impact on Sri Lankan and European businesses, and on foreign direct investment. "Such measures impair Sri Lanka's efforts to become a regional hub and negatively impact Sri Lankan exports," the EU said in a statement. "(A) prolonged import ban is not in line with World Trade Organization regulations." But central bank governor W. D. Lakshman said the EU's comments were "an overreaction". "At a time when we are trying to deal with a balance of payments problem, even WTO rules allow us to do certain things to meet the... challenge." Sri Lanka's imports fell to $13.1 billion in January-October from $16.4 billion in the corresponding period last year. The economy contracted by an unprecedented 1.7 percent in the first quarter of this year, after a 2.3 percent economic expansion last year. Global ratings agency Moody's downgraded Sri Lanka's sovereign credit rating in September, saying the island nation could struggle to service its huge foreign debt. aj/grk/mtp

Cash-strapped Sri Lanka extends import ban despite EU protest

The European Union on Thursday urged Sri Lanka to end its import restrictions put in place as a response to economic hardships caused by the COVID-10 pandemic, saying the current curbs are having a negative impact on the businesses.

In April, the Lankan government stopped imports in the wake of the COVID-19 pandemic, which it said would be restricted to essentials. This was being widely seen as easing the pressure on the local rupee to prevent it from sliding against the US dollar.

In a statement on Thursday, the EU said it had bought more than a billion Euros worth of goods (220 billion rupees) from Sri Lanka than it bought 2018 and 2019 creating a so-called trade surplus in favour of the island nation.

"Trade, however, is not a one-way street. The current import restrictions are having a negative impact on Sri Lankan and European businesses, and on Foreign Direct Investment,? it said in a statement issued by the EU Colombo office.

"Such measures impair Sri Lanka's efforts to become a regional hub and negatively impact Sri Lankan exports by constraining the import of raw material and machinery. We recall that a prolonged import ban is not in line with World Trade Organisation regulations," it added.

The call came after the Lankan government presented its 2021 budget, maintaining that import restrictions must remain in place to stabilise the rupee.

The local currency had depreciated by over 9 per cent by early April against the dollar. It recorded 196.75 to the dollar and now remains stabilized around 185 levels which the government mainly attributed to the banning of vehicle imports.

Prime Minister Mahinda Rajapaksa, who is also the Finance Minister, presented the budget on Tuesday amid unprecedented health measures as the island nation since early October is witnessing a massive spike in COVID-19 infections.

Presenting the annual budget, Rajapaksa said the expected economic growth rate for 2021 is 5.5 per cent.

The GDP growth had reduced to 1.6 per cent year-on-year in the first quarter of 2020, following a 2 per cent growth in the last quarter of 2019, the Central Bank had previously announced.&nbsp;

The European Union on Thursday urged Sri Lanka to end its import restrictions put in place as a response to economic hardships caused by the COVID-10 pandemic, saying the current curbs are having a negative impact on the businesses.

The European Union on Thursday urged Sri Lanka to end its import restrictions put in place as a response to economic hardships caused by the COVID-10 pandemic, saying the current curbs are having a negative impact on the businesses. In April, the Lankan government stopped imports in the wake of the COVID-19 pandemic, which it said would be restricted to essentials. This was being widely seen as easing the pressure on the local rupee to prevent it from sliding against the US dollar. In a statement on Thursday, the EU said it had bought more than a billion Euros worth of goods (220 billion rupees) from Sri Lanka than it bought 2018 and 2019 creating a so-called trade surplus in favour of the island nation. "Trade, however, is not a one-way street. The current import restrictions are having a negative impact on Sri Lankan and European businesses, and on Foreign Direct Investment,? it said in a statement issued by the EU Colombo office. "Such measures impair Sri Lanka's efforts to become a regional hub and negatively impact Sri Lankan exports by constraining the import of raw material and machinery. We recall that a prolonged import ban is not in line with World Trade Organisation regulations," it added. The call came after the Lankan government presented its 2021 budget, maintaining that import restrictions must remain in place to stabilise the rupee. The local currency had depreciated by over 9 per cent by early April against the dollar. It recorded 196.75 to the dollar and now remains stabilized around 185 levels which the government mainly attributed to the banning of vehicle imports. Prime Minister Mahinda Rajapaksa, who is also the Finance Minister, presented the budget on Tuesday amid unprecedented health measures as the island nation since early October is witnessing a massive spike in COVID-19 infections. Presenting the annual budget, Rajapaksa said the expected economic growth rate for 2021 is 5.5 per cent. The GDP growth had reduced to 1.6 per cent year-on-year in the first quarter of 2020, following a 2 per cent growth in the last quarter of 2019, the Central Bank had previously announced.

European Union asks Sri Lanka to end its import restrictions

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Cash-strapped Sri Lanka extends import ban despite EU protest

European Union asks Sri Lanka to end its import restrictions