Sri Lanka is gradually lifting some restrictions on vehicle imports, signaling the country’s return to stability after enduring a severe economic crisis. Beginning February 1, 2025, the government will allow the importation of buses, trucks, and utility vehicles. This marks an important step for the 22 million residents who have faced crippling shortages and price inflation following years of economic turmoil.
The restrictions on imports have significantly impacted the automotive market, with many citizens eagerly awaiting the relaxation of the ban on private cars and other personal vehicles. Now, as the economy stabilizes, the hope is this move will alleviate the long wait faced by those wishing to own and operate vehicles for personal use.
Sri Lanka's economic struggles escalated dramatically over the past few years, with the country facing its first-ever foreign currency shortage, which led to government's inability to meet creditor payments and resulted in fuel, food, and medicine shortages. The chain of events saw citizens rising against the government, culminating in the ousting of then-President Gotabaya Rajapaksa, highlighting the discontent with governance and economic management.
According to reports from the BBC, Murtaza Jafeerjee, chair of Advocata—a Colombo-based economic think tank—believes the lifting of the import ban is long overdue. "The vehicle imports will not only increase the government's revenue but will also trigger other economic activities like car financing, dealer revenue, car servicing, and other related activities, creating jobs," he stated. It is anticipated the influx of vehicle imports will invigorate related sectors and contribute positively to the nation’s GDP.
Nonetheless, Sri Lanka’s Information Minister, Nalinda Jayatissa, stressed caution, urging the government to avoid overwhelming foreign reserves: "We don’t want a surge of imports which will deplete our foreign reserves." This statement reflects the continuing wariness within the government about spiraling costs and the need for appropriate measures to control imported goods.
The inflationary impact of vehicle imports cannot be ignored. Gayan Indika, who usually provides vehicles for weddings and operates as part-time cab driver, expressed frustration: "I want to buy a new car so I can do my work and resume my private cab rental. Without mobility, I am losing revenue." Many citizens face similar difficulties as they navigate the high cost of vehicles. With excise duties for imports skyrocketing to between 200% and 300% based on engine size and value-added tax (VAT) set at 18%, vehicle prices continue to soar.
School teacher R Yasodha illustrated the stark reality of the situation, remarking: "If we calculate the tax and the price, the cost of an average-sized car has doubled from 2.5 million rupees ($8,450; £6,800) to five million rupees." Such financial burdens raise serious questions about who will be able to afford new imports and whether the relaxation of bans will truly alleviate the mobility crises for ordinary people.
Prior to the ban, Sri Lanka had imported about $1.4 billion worth of vehicles annually. The central bank has announced it plans to allocate up to one billion dollars for vehicle imports, indicating this funding will be released gradually. Officials of the Vehicle Importers Association voiced concern about potential affordability issues, emphasizing many individuals may not benefit from the lifted restrictions due to increased taxes and the weak currency.
The country's vehicle industry relies heavily on imports, as most transport is facilitated by vehicles sourced from other countries including Japan, India, and now growing interest from China for electric vehicles. Even with renewed prospects of imports, the local economic conditions signal uncertainties about how many citizens can truly take advantage of these opportunities.
With the economic situation improving cautiously, there remains much work to do. Vehicle imports are just one aspect of the broader path toward recovery amid high living costs and sustained public pressure on the government for transparency and accountability following years of corruption and mismanagement. While the loosening of restrictions may initially excite some, how the government manages the economic situation will be pivotal for long-term growth and prosperity for the nation.