Sri Lanka is set to ease some of its vehicle import restrictions, signaling a recovery from the severe economic crisis that led to the resignation of the country’s president.
Starting February 1, imports of buses, trucks, and utility vehicles will be allowed, with further relaxations on other vehicle types expected over time.
Many Sri Lankans are hoping the government will also lift the import ban on private cars, SUVs, and three-wheeled taxis, which are commonly used as public transport. However, with vehicle prices rising due to the scarcity of new cars, a weak currency, and high taxes, there are concerns about who will be able to afford these vehicles.
In 2022, Sri Lanka faced a severe foreign currency shortage, which led to its first-ever default on debt obligations. This crisis caused widespread shortages of fuel, food, and medicine, triggering massive anti-government protests that led to the ousting of then-President Gotabaya Rajapaksa. The country secured a $2.9 billion bailout from the IMF, while Rajapaksa’s successor introduced austerity measures, including tax hikes and the removal of energy subsidies. Since then, Sri Lanka’s economy has been slowly recovering.
The decision to ease the vehicle import ban has generated excitement among those eager to buy new cars or vans. Murtaza Jafeerjee, chair of Colombo-based economic think tank Advocata, stated that the move was long overdue, emphasizing that vehicle imports would boost government revenue and stimulate various economic activities such as car financing, sales, and servicing, creating job opportunities.
However, Information Minister Nalinda Jayatissa cautioned against a rapid surge in imports that could deplete foreign reserves, urging a careful approach.
Sri Lanka relies on imports for almost all its vehicles, many sourced from Japan and India, with growing interest in Chinese-made electric cars. The cost of used cars has skyrocketed, with some models now costing two to three times their pre-ban prices.
The restrictions have been particularly hard on individuals like Gayan Indika, a part-time cab driver who also provides cars for weddings. He expressed frustration, stating that the lack of a car is significantly hurting his income.
For many Sri Lankans, particularly in areas with limited public transportation, owning a car is essential for mobility. Software professional Sasikumar from Kandy highlighted that a car is crucial for traveling across the country due to the lack of reliable public transport.
Before the ban, Sri Lanka imported vehicles worth about $1.4 billion. The central bank has planned to allocate up to a billion dollars this year for vehicle imports, although this will be released gradually.
Arosha Rodrigo, representing the Vehicle Importers Association of Sri Lanka, noted that his family’s dealership, which used to import about 100 vehicles per month, has been unable to import any since the ban was implemented. Even with further relaxation, he warned that high taxes and a weak currency would make vehicles unaffordable for many.
The government has significantly increased excise duties on imported vehicles, now ranging from 200% to 300%, depending on engine size, in addition to an 18% VAT. The depreciation of the Sri Lankan rupee against major currencies like the US dollar further drives up vehicle prices.
The rising costs are discouraging potential buyers like school teacher R Yasodha, who shared that the price of an average car has doubled from 2.5 million rupees ($8,450; £6,800) to five million rupees, making it unaffordable for her family.
