Cash-strapped Sri Lanka ends ban on vehicle imports

COLOMBO: Sri Lanka announced the lifting of a five-year ban on vehicle imports Tuesday as the country showed further signs of emerging from its worst economic meltdown.

Information Minister Nalinda Jayatissa said buses, trucks and utility vehicles will be allowed in from Saturday under a phased removal of restrictions in place since 2020. “We are moving very cautiously because we don’t want a surge of imports that will deplete our foreign reserves,” Jayatissa told reporters in Colombo.

“Depending on the demand, we will open imports of other categories of vehicles such as cars, motorcycles and three-wheelers.” He said the imports were necessary to generate much-needed tax revenue, and the government hoped to cap imports at about $1.2 billion this year.

Current tax rates on vehicles are over 300 per cent. Sri Lanka spent $1.4 billion on vehicle imports in 2019, the last full year before the import ban was imposed in March 2020.

The island nation earlier attempted to end the ban on commercial vehicle imports in August 2023, but importers were unable to open letters of credit while the country was still in default on its foreign debt. Sri Lanka formally ended its status as a bankrupt nation in December after securing debt restructuring deals with both bilateral and private creditors.

Sri Lanka defaulted on its $46 billion external debt in April 2022 as the country ran out of foreign exchange to finance imports, causing painful shortages of food, fuel and medicines. Months of street protests led to the toppling of then-president Gotabaya Rajapaksa, who was accused of corruption and mismanagement. His successor secured a bailout loan from the International Monetary Fund, which has said that the South Asian nation is making a recovery but is still not out of the woods.