Trade Policy

Sri Lanka, the pioneer in the free market economic reforms in the South Asian region embarked on a programme of liberalizing its economy in 1978 by introducing fundamental reforms in the broad areas of investments, fiscal policy, tariffs and exchange rates. Sri Lanka is currently known to be the most liberalized economy in the entire region of South Asia. Series of unilateral measures implemented during the past, which resulted in rationalization and simplification of the country’s tariff structure to a large extent.

Today, tariffs and other border levies act as the key tools for regulating the foreign trade regime of Sri Lanka, while there are no other barriers or controls such as licensing and quotas on either imports or exports. The tariff policy of the government aims at providing a transparent and predictable framework for all stakeholders in the foreign trade sector.

Based on product categories, currently, Sri Lanka maintains the following 5-band tariff structure.

  1. Essential goods 0.0%
  2. Intermediate products 15.0%
  3. Basic raw materials 2.5%
  4. Other finished products 28.0%
  5. Semi-processed goods 6.0%

Sri Lanka has granted preferential tariff benefits to a wide range of products imported under the Indo-Sri Lanka Free Trade Agreement, Pakistan-Sri Lanka Free Trade Agreement, South Asian Free Trade Area and Asia-Pacific Trade Agreement

Being a pioneer member of the World Trade Organization (and also one of the founding members of the GATT), Sri Lanka remains fully committed towards pursuing a rule based multilateral trading system that will ensure a transparent and predictable trading environment to the international business community.

The progressive liberalization of the economy during the past two decades has resulted in a business friendly environment. The private sector is recognized as the engine of economic growth with the role of the state being to provide an institutional framework wholly supportive of private sector participation in development activities.

The trade policy objectives of Sri Lanka include moving towards a more outward-oriented trade regime, strengthening and increasing overseas market access for Sri Lankan products, and further integrating Sri Lanka into the global economy. These objectives have been pursued through multinational, regional and bilateral trade negotiations. Policies have been aimed at enhancing production and productivity through a continuous process of economic reforms, with a view to promoting a more efficient allocation of resources, while improving the environment for private domestic and foreign investment. Special stimulation was given for private investments and export oriented activities. As a result, Sri Lanka has attracted by the foreign investors and subsequently the volume of foreign investment in the country was remarkably increased during the past two decades.