The Delegation of the European Union (EU) recently raised concerns over the import restrictions imposed by the Government of Sri Lanka. Issuing a statement together with the Embassies of France, Germany, Italy, Netherlands and Romania, the EU stated that; the current import restrictions are having a negative impact on Sri Lankan and European businesses, and on Foreign Direct Investment.

Meanwhile, this subject was brought up at the Monetary Policy review online press conference held yesterday (26). Responding to a query the Central Bank Governor Deshamanya Prof. W.D. Lakshman stated that the statement which was published by EU countries and EU organization is probably 'an overreaction presented too early."

“The statement which was published by the EU countries and EU organizations is probably an overreaction presented too early. We are at a time that we are trying to resolve our Balance of payments (BOP) problem. Even under World Trade Organisation (WTO) rules I think the countries are allowed to do certain things which are needed to meet BOP problems and in any case I believe that this kind of issue can be resolved with adequate discussions among the parties concerned. I think our external relations authorities are probably taking up this matter for discussion between Sri Lankan authorities and the relevant EU authorities.”

Meanwhile, Central Bank of Sri Lanka Director Economic Research Dr. Chandranath Amarasekara also expressed the following views:

“We also observed the statements made by the European Union (EU). Of course the European Union is an important trading partner for Sri Lanka. As you know the US and the Eurozone they are main destinations for exports. When you look at bilateral trade balances, we know that we have large trade deficits with our Asian counterparts as well as the oil importing countries.  So, essentially it is extremely important for us to maintain or try to improve the trade surpluses that we have with the US, the European Union countries and the other Western countries and at the same try to reduce the trade deficits we have with China, India and the Asian countries. So, those efforts are ongoing and even in the budget there were proposals about economic diplomacy and improving trade ties with other countries."

"I think the concern of the European Union was about the ongoing import restrictions and we studied the impact of import restrictions on imports from those countries and it seems that the impact is quite minimal. So, as you know most of the import restrictions are on non-essential imports, including motor vehicles and also on the imports of particularly agricultural goods, because the Government wanted to promote domestic production of agricultural goods. So, the Government has re-emphasized the need to maintain some of this restrictions on Non- essential imports, but that does not mean the imports from the EU have reduced in the past and we don’t except that going forward. But, in the past also when the European Union imposed some restriction on exports, there was a small drop in exports to that region and of course having GSP+ and the other concessions have helped us to support the growth in exports to that region."

"I think all of us need to understand why the import restrictions have been put in place. It is primary because of the difficult situation we are in. We have saved about $3.3 billion because of the reduction in imports in the first 10 months and will be saving about $ 4 billion through the reduction in imports. So, that we can continue to service our debt without any additional pressure on the Balance of Payments (BOP).