Sri Lanka allows imports of tile, squatting pans on credit
ECONOMYNEXT – Sri Lanka is allowing some tile and ceramic items including squatting pans which were banned in 2020 to be imported on 180 day credit, a gazette notice said.
Tiles that that have a bill of lading or an airway bill dated February 03 onwards would be allowed in.
Sri Lanka used to tax tiles wash basins, toilet fittings and squatting pans at high rates for many years to give high profits (rents) to Mercantilist businesses.
Most of Sri Lanka’s ceramic firms are no longer export competitive but make large profits under cover of import duties in a tax arbitrage exercise, critics say.
Many ceramic firms that ended up with stocks in a Coronavirus lockdown have found them depleted as construction recovered.
Domestic ceramic producers are expected to report record profits this quarter with competition eliminated by import controls.
Sri Lanka is also running out of kaolin, the open mining of which is causing environmental degradation, critics say.
In addition to squatting pans Sri Lanka also controls basic foods such as pototoes and maize which is a feedstock for protein production to give rents to collectors and landowners.
The import bans were imposed after money printing in March and a ‘flexible’ exchange rate with an unknown weak side convertibility undertaking in the form of a disorderly market conditions rule (DMC) led to a steep fall in the currency and a credit downgrade.
The currency was then defended around 195 to the US dollar and stabilized as credit collapsed in a Coroanvirus lockdown and consumption fell. Importers then ended up with large volumes of stocks.
There is now speculation, among market participants whether the DMC is around 195 to the US dollar. A defence of a specific peg without injecting cash commits a monetary policy to prudent policy.