Sri Lanka (Commonwealth) _ Sri Lanka lifted the 2020 automobile import embargo that was implemented to relieve the strain on foreign exchange reserves brought on by the COVID-19 outbreak. The decision will take into effect from February 1 onwards.
On January 24, President Anura Kumara Dissanayake issued a gazette that lifted the import ban on cars that had been in place since the beginning of 2020 due to the COVID-19 pandemic. After Sri Lanka’s economic crisis, which was brought on by a lack of foreign exchange, the embargo was extended.
This was Sri Lanka’s first debt default, announced in April 2022. Minister and Cabinet spokesman Nalinda Jayathissa commented on the easing of the import prohibition, stating that only trucks, buses, and double cabs will be permitted in the initial phase.
Last week, President Dissanayake said that the government would set aside USD 1.2 billion for the first round of automobile imports. Prior to the embargo taking effect, the island spent USD 1.4 billion on car imports in 2019.
Jayathissa stated that we shall exercise caution when it comes to preserving the dollar reserves. As we work to increase government revenue, we will continue to monitor the reserves. Therefore, it will shortly be announced what tax these imports would be subject to.
The island’s economy recovered after entering the IMF bailout, and strict austerity measures helped it attain its present reserves of $6 billion. The IMF bailout and its strict reform regime state that Sri Lanka must meet certain goals for reserve maintenance in order to prevent another balance of payments crisis like the one that occurred in 2022.
In his capacity as finance minister, President Anura Kumara Dissanayake overturned the prohibition on a number of motor vehicles, including taxis and special purpose vehicles, in a gazette notification dated January 27.
The list includes tiny vehicles with engines under 1000cc, such as go-karts and quadricycles. The automobiles that the import controller, who operationalizes the gazette, will list in the circular are unclear, though.
Auto trishaws, dumpers, and milk tankers that are no older than five years are allowed, as are motor vehicles that can carry ten or more people. The list includes gully bowswers, firefighting vehicles, mobile drilling derricks, and crane trucks.
As the central bank produced money to target a centrally planned policy rate, increasing excess liquidity and igniting the greatest currency crisis in Sri Lanka’s history, the country banned the import of numerous items in 2020.
The public is subject to import and exchange regulations as a means of compensating for its flawed operating framework, which is pushing down rates. Cars are among the final items that individuals can import.
The amount of imports is still subject to certain limitations. Any number of automobiles might be imported by an importer who was registered with the Department of Motor Traffic.
In the upcoming year, any other individual may import one car. If a car is not sold within 90 days of import, the importer must register it in his own name or pay a 3 percent penalty.
According to the gazette, “the Controller General of Imports and Exports shall issue ‘Operational Instructions’ to the Director General of Customs, licensed banks, or any other relevant authorities in order to accomplish the objectives of these regulations.” The Import and Export Control Act of 1969 in Sri Lanka governs the restrictions.
After the law was passed in August, the central bank created a deficit in the balance of payments by printing money, including to refinance private credit (similar to inflationary open market operations).
According to central bank data, the bank rate remained at 5.5 percent from May 1968, and refinancing was offered for industry and agriculture at 5.5 percent, trade and commerce at 6.5 percent, tea factories at 5 percent, and agricultural credit schemes at 1.5 percent.
