Para-Tariff Promises Broken: Sri Lanka Stalls on Trade Reforms

Despite repeated pledges to abolish para-tariffs and streamline import duties, Sri Lanka has yet to fulfil its commitments a delay that risks damaging its credibility with global partners, including the United States.

Treasury’s Proposed Duty Structure

Treasury Secretary Harshana Suriyapperuma recently reiterated that the introduction of a new 30 percent duty band added to the existing 0, 10, 15 and 30 percent rates was not meant to raise extra revenue but to replace multiple para-tariffs such as the CESS, PAL and SCL with a more transparent and globally consistent structure.

“This particular exercise is to harmonize ourselves with the region and with global approaches on how duties are being charged, doing away with para-tariffs,” Suriyapperuma explained at a post-budget seminar. “We consider it more or less revenue-neutral not targeting additional revenue but integrating better with the global economy.”

Lack of Implementation Timeline

However, nearly a year after the proposal, the government has yet to announce a clear timetable or publish the findings of the Cabinet-approved committee reviewing existing trade agreements. While Suriyapperuma hinted that implementation may begin in the first quarter of 2026, no concrete steps or deadlines have been disclosed, leaving local industries, exporters, and international observers uncertain about the pace and direction of reform.

Economic Context and Risks

The lack of transparency comes at a time when the economy shows fragile signs of recovery. According to the Central Bank of Sri Lanka (CBSL), the country recorded 4.8 percent GDP growth in the first quarter of 2025, but momentum has slowed, with full-year growth now projected at around 4.5 percent. Inflation remains relatively subdued, and foreign reserves stood near US $6 billion by mid-2025 a modest cushion for an import-dependent economy still managing debt restructuring pressures.

Impacts of Para-Tariffs

Economists warn that the failure to phase out para-tariffs could weaken competitiveness and discourage exports. These levies have long distorted pricing, inflated costs for consumers, and protected inefficient domestic lobbies that thrive under import substitution rather than innovation.

Unless Sri Lanka swiftly implements its para-tariff reforms with a clear, publicly disclosed schedule and transparent data, its integration with global markets and its credibility with trade partners will remain in doubt. The rhetoric of reform must now give way to action.