Sri Lanka lifts vehicles import ban for first time in four years

Depleted foreign reserves in April 2022 led to an unprecedented economic crisis in Sri Lanka, forcing the island nation to announce its first-ever sovereign default. File
| Photo Credit: Reuters

Sri Lanka has announced that they will lift the vehicles import ban which was put in place in 2020 to ease the pressure on foreign exchange reserves owing to the COVID-19 pandemic.

By the gazette issued on Wednesday (December 18, 2024) the importation of public transport vehicles have been allowed for the first time since early 2020.

The Ministry of Finance said the policy to ban vehicle imports was implemented with the intention of easing the pressure on foreign exchange reserves owing to the COVID-19 pandemic and the economic downturn of 2022.

President Anura Kumara Dissanayake addressing Parliament on Wednesday (December 18, 2024) said the importing cars for private use will be allowed from February 2025. However, the decision is subject to rules so as to protect the island nation’s effort to build foreign reserves.

All importers must sell their imports within three months, if not a three per cent fee would be charged.

“These conditions have been imposed with the intention of safeguarding foreign exchange reserves of the country by way of discouraging importation of an excessive number of vehicles and keeping unnecessary stock of motor vehicles by the importers while spending substantial amounts of foreign exchange,” a statement said.

The vehicle importers’ association hailed the move. They had lobbied the government extensively to lift the import ban.

Understanding the sovereign debt crisis in Sri Lanka

The IMF bailout conditions dictate that Sri Lanka must build up its forex reserves to prevent a crisis similar to 2022 when shortage of foreign reserves led to the absence of fuel and essentials.

The IMF in recognition of Sri Lanka’s recovery from the economic downturn had allowed vehicle imports as a measure of increasing state revenue by way of import duties.

Depleted foreign reserves in April 2022 led to an unprecedented economic crisis in Sri Lanka, forcing the island nation to announce its first-ever sovereign default.