ECONOMYNEXT – Sri Lanka is allowing the import of Sarees, an elaborately draped garment worn by women in South Asia, which were halted under import controls imposed in 2020, according to a gazette notice.
Sarees under HS Code 62.11.42/43/92 would now be allowed in under 90 day credit.
Earlier import license were required for sarees.
It is not clear who were issued import licenses for sarees.
Among younger Sri Lankan women sarees are now limited to special occasions but state workers and politicians wives as well as senior business executives wear sarees as part of the island’s Indianized culture.
The current import controls are the worst since the re-opening of the economy in 1978 ending a so-called closed economy.
At the time sarees used to be smuggled in through the so-called ‘Velvettithurai route’, analysts who are familiar with the region’s history say.
Sri Lanka’s Tamil Tiger separatists started to grow in the 1970s at a time when smuggling was a highly profitable activity for fishermen and connected parties in Jaffna.
Sri Lanka imposed sweeping import controls in April after printing money to in February and March as revenues fell after tax cuts and a lockdown brought economic activities to a virtual halt.
In the 1970s the central bank bought large volumes of Treasury bills to create forex shortages and import controls, which promoted smuggling as the excess demand spilled over the balance of payments.
Domestic inflation from the printed money triggered price controls, which in turn created black markets.
However analysts have dug up information that showing that in the darkest days of the 1970s there was at least one person with economic knowledge inside the central bank.
“The Treasury had to finance its expenditures increasingly by resort to Treasury bills despite the fact that no significant tenders forthcoming to absorb the successive issues of Treasury bills,” the unknown classical economist had written in an anniversary publication of the monetary authority.
“The responsibility of absorbing the unsubscribed portion of the Treasury bill issue fell on the central bank.
“A major drawback in financing of budget deficits with central bank credit is that while the process involves an expansion in the money supply, it is not necessarily accompanied by an expansion by a corresponding increase in national product.
“Consequently, increased demand emanating from central bank financing of budget deficits had to be satisfied by increased recourse to foreign supplies with resulting pressure on the country’s external payments.
The central bank failed to sell a 43 percent of a bill auction on February 02, 2021, the same day the Finance Minister signed the gazette allowing the import of Sarees on credit.
Sri Lanka fails to sell 43-pct of bill auction under price ceilings.