Sri Lanka is set to lift restrictions on the importation of certain vehicles starting February 1, signaling a gradual recovery from the devastating economic crisis that led to the ousting of its president.
The government will allow the import of buses, trucks, and utility vehicles, offering a glimmer of hope.
However, citizens are eagerly anticipating the removal of the ban on private cars, sport utility vehicles, and three-wheeled taxis, locally known as trishaws.
Despite the enthusiasm, concerns about affordability loom, with high vehicle prices raising questions about how accessible these vehicles will be for the average Sri Lankan.
Sri Lanka faced an extraordinary economic collapse in 2022, marked by a severe shortage of foreign currency that prevented the country from meeting its financial obligations to creditors for the first time in its history.
This crisis triggered widespread shortages of essential goods, including fuel, food, and medicine, placing immense strain on the population.
As frustration grew, large-scale anti-government protests led to the resignation of then-President Gotabaya Rajapaksa.
In response, the newly appointed government secured a $2.9 billion bailout from the International Monetary Fund and enacted austerity measures such as tax increases and the removal of energy subsidies.
These tough steps have slowly started to stabilize the country’s economy. The announcement to lift the vehicle import ban has sparked a sense of optimism among citizens who have been waiting for years to purchase new vehicles.
The decision to lift the import restrictions has brought about a wave of hope. Many, including Murtaza Jafeerjee, chair of the economic think tank Advocata, believe this step is long overdue.
“Allowing vehicle imports will not only boost government revenue but also stimulate various economic activities, such as car financing, dealership sales, and vehicle servicing,” Jafeerjee commented.
These sectors could create much-needed jobs and contribute to the overall economic recovery.
The government is, however, exercising caution.
The information minister, Nalinda Jayatissa, emphasized the need to prevent a sudden surge in imports that could deplete the country’s foreign reserves.
As Sri Lanka lacks large domestic vehicle manufacturing facilities, most vehicles are imported from countries like Japan, India, and increasingly, China, with a growing interest in electric vehicles.
While lifting the ban is a step toward revitalizing the automotive sector, the government must strike a careful balance to ensure the country’s economic stability.
Even with the ban being lifted, affordability remains a significant concern for many Sri Lankans.
The prices of used vehicles have skyrocketed, with some models now costing up to three times their pre-ban prices.
This has particularly affected individuals like Gayan Indika, who depends on vehicles for his wedding rental business and part-time taxi driving.
“I am frustrated by the lack of mobility and revenue due to the inability to buy a new car,” Indika shared.
For many, owning a vehicle is essential, especially in a country with limited public transportation options.
Sasikumar, a software professional from Kandy, stressed the importance of cars for traveling across the island.
He urged the government to either lift the car import ban or improve public transport services.
Before the restrictions, Sri Lanka imported around $1.4 billion worth of vehicles. This year, the central bank plans to allocate up to $1 billion for vehicle imports, although these funds will be distributed gradually.
Even with the lifting of the ban, the rising costs may make vehicles unaffordable for many Sri Lankans. Excise duties on imported vehicles have been significantly raised, with taxes ranging from 200% to 300%, depending on engine size. In addition, an 18% Value Added Tax is applied to all imported vehicles.
The depreciation of the Sri Lankan rupee further exacerbates the situation, pushing prices even higher.
A school teacher, R. Yasodha, had hoped to purchase a vehicle, but the soaring prices have left her disheartened.
“The cost of an average-sized car has doubled, making it unaffordable for many,” she said.
As the government navigates the challenges of lifting the import ban, it must also address the economic realities that affect its citizens’ purchasing power.
While the easing of the vehicle import restrictions marks a hopeful step forward, Sri Lanka’s path to recovery remains filled with challenges.
