To be on IMF’s Good Books

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UNP leader, Finance Minister and Premier of the SLPP Government, Ranil Wickremesinghe, is following in the footsteps of his uncle J. R. Jayewardene by transforming Sri Lanka from an import licensing Raj to a taxation regime to clinch an IMF loan targeted by him to be on board by the middle of the month.

These recent changes in the financial landscape coincided with the Government concluding technical discussions with the IMF only a few days ago.

Among several import taxes, either levied or increased, replacing the previous licensing Raj, to protect Sri Lanka’s sparse US dollar reserves, by Wickremesinghe, by recent gazette notifications, effective from the beginning of this month, include Customs Import Duty (CID) surcharge of 75 per cent on cereals, flour, oranges (mandarins) and  condensed milk, a 100 per cent CID surcharge on cheeses, fruit juices, such as grape, oranges, passion fruit and mixed fruit, mineral waters and sugar sweetened milk beverages and a 25 per cent CID surcharge on pasta.

Additionally, a Rs 2,000 per kilo Special Commodity Levy (SCL) charged on yoghurt, an SCL of Rs 1,500 per kg on  butter, Rs 600 per kg SCL on grated cheese, an SCL of Rs 200 per kg on dates, an SCL of Rs 600 per kg on fruits like oranges, grapes and apples.

These items, till Wednesday (1 June), were subject to an import licencing Raj initiated by President Gotabaya Rajapaksa’s younger brother Basil, the immediately preceding Finance Minister on 9 March 2022, for the same purpose of protecting Sri Lanka’s foreign reserves.

Among some of the other items liberated from licensing to heavy import taxation, as above, are a 10 per cent import cess on clothing accessories, 15 per cent import cess on lipsticks, eye shadow, shampoos, handbags, footwear, glassware, electric fans, grinders, shavers, electric lamps,  microwave ovens, electric irons, rice cookers, toasters, electric kettles, digital cameras, electronic monitors, wrist watches, clocks, guitars, violins, harps, keyboard instruments, combs and Christmas lightings.

In related developments, among a few other imported items liberated from licensing to taxation under Wickremesinghe’s stewardship, as above, are CID surcharges of 100 per cent each on beer, wines and alcohol,  cigars and cigarettes,  saddles, handbags, apparel articles, articles of leather, handicraft and carpets,  umbrellas, electric fans, air conditioners, fridges,  washing machines,  vacuum cleaners, water heaters,  chandeliers, toys, electric trains, playing cards, video games and articles for Christmas festivities.

A 50 per cent CID surcharge on imported ceramic ware and 75 per cent CID surcharges on imported footwear, glassware, gas operated cooking appliances, gloves and sinks and a 25 per cent CID surcharge on pressure cookers.

Forty five years ago when Jayewardene as Premier freed the country from the shackles of a licensing Raj with the inherent corruption which goes with thus, Central Bank of Sri Lanka’s  1977 Annual Report  said, “The budget speech for 1978 paved the way for the operation of a new trade and payments policy for Sri Lanka. The liberalisation of imports consequent upon the floating of the rupee would result in increased imports of industrial and agricultural inputs required for the country’s economic growth.

 With effect from November, 1977 the Government drastically reduced the number of imported items which required prior licensing to taxation. The Special Import Licence Order No. 1 of 1977 specified less than 150 items that required licensing and permitted the liberal import of machinery, equipment and spares. The selection of the license-requiring items was determined on the basis of security requirements, the need for protection of certain local enterprises and the need to continue certain Government subsidies. A new tariff structure designed to protect local enterprise, while allowing some import competition was implemented simultaneously.”

Corruption, coinciding with Rajapaksa’s elder brother, Mahinda’s (also the immediately preceding Premier) near 10-year Presidency from 17 November 2005 to 8 January 2015 put Sri Lanka’s economic progress 50 years back.

Wickremesinghe is on a mission to put the country back on track, economically and politically. The economy doesn’t operate in a vacuum, but is intrinsically linked to the political infrastructure of a country. Sound political infrastructure translates to sound economic infrastructure.