Sri Lanka raises taxes on wine, cheese to curb imports

Cash-strapped Sri Lanka raised tariffs on a wide range of goods including wine and cheese, in a new drive to discourage imports and preserve foreign currency reserves, the finance ministry said Thursday.

The island nation is in the midst of its worst economic crisis since independence, with dire shortages leading to anti-government protests which last month turned violent.

The government has now scrapped licensing for some 369 items and replaced it with sharply higher taxes, officials said.

Key targets will be luxury items out of reach for most Sri Lankans but widely used by hotels catering to foreign tourists, a key source of revenue.

From 1 June, foreign cheese and yogurt attract a new tax of 2,000 rupees ($5.50) for a kilo (2.2 pounds). Duty on chocolates was raised by 200 per cent.

Additional levies also apply to imported fruit while duties on all alcoholic drinks and on electronic appliances were doubled.

The government had imposed a wide import ban in March 2020 in a bid to conserve its foreign exchange reserves, but have gradually moved towards a fee-based import licensing.

However, the government is now lifting the licensing regime in favour of the taxes. Bans on the imoprt of vehicles, spare parts and machinery remain.

Although some of the import restrictions have been relaxed, importers are unable to find dollars to pay for them as commercial banks have run out of foreign exchange.

The country is facing acute shortages of fuel, food and medicines because of the foreign exchange crisis, while it is also struggling with lengthy electricity blackouts and runaway inflation.

Sri Lanka has asked for a bailout from the International Monetary Fund (IMF) after defaulting on its $51 billion foreign debt.

After last month's violence in which at least nine people died, Mahinda Rajapaksa quit as prime minister but his brother Gotabaya Rajapaksa remains president.