Sri Lanka Considers Lifting Motor Vehicle Import Ban in 2025 as Foreign Reserves Reach Nearly $5 Billion

Sri Lanka to lift vehicle import ban in 2025, prioritizing green cars and boosting tourism and maritime sectors. Economic recovery and financial stability drive this decision, but global oil price risks loom.

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Muhammad Jawad
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Sri Lanka Considers Lifting Motor Vehicle Import Ban in 2025 as Foreign Reserves Reach Nearly $5 Billion

Sri Lanka Considers Lifting Motor Vehicle Import Ban in 2025 as Foreign Reserves Reach Nearly $5 Billion

Sri Lanka is considering lifting its motor vehicle import ban in 2025 as the country's foreign reserves approach nearly USD 5 billion. The government is prioritizing the import of green vehicles and protecting the local automotive industry as part of its broader strategy to support the tourism and maritime sectors for economic growth.

The decision to lift the import ban in 2025 is subject to Sri Lanka's continued economic recovery and the availability of sufficient foreign exchange reserves. The government plans to develop the necessary infrastructure, such as charging stations, before allowing more vehicle imports. Additionally, the government is exploring the possibility of increasing the tax threshold to boost tax revenue collection.

Why this matters: Sri Lanka's consideration of lifting the motor vehicle import ban in 2025 reflects the country's ongoing economic recovery and financial stability. This move has the potential to stimulate growth in key sectors like tourism and maritime while promoting environmental sustainability through the prioritization of green vehicles.

The Sri Lankan rupee has been allowed to re-appreciate, bringing tangible benefits to people in the form of lower energy and food prices, and helping the Employees' Provident Fund to partially recoup its losses. The central bank engineered a balance of payments surplus from around September 2022 through deflationary monetary policy and ended a surrender rule in March 2023, allowing the currency to appreciate. This has reversed initial capital losses to the EPF in dollar terms, with the EPF's end-2022 value now around $11.38 billion, up about $1.85 billion.

However, Sri Lanka's economic recovery faces a new threat from the potential fallout of an escalating conflict between Israel and Iran, which could disrupt global oil supplies and international trade. Higher global oil prices could lead to increased transportation costs, further straining the economy and making it difficult for Sri Lanka to absorb the higher oil import costs. Disruptions to shipping and trade, with freight costs potentially doubling, could impact Sri Lanka's exports and imports. The escalating conflict also poses risks to tourism and remittances.

Sri Lanka's 2024 budget proposes several measures to improve tax compliance, including prosecuting those who fail to file tax returns and making the submission of a Taxpayer Identification Number (TIN) mandatory for certain transactions. The government failed to achieve its target of one million new tax files this year. The budget also includes changes to the tax treatment of Unit Trusts an

Key Takeaways

  • Sri Lanka to lift motor vehicle import ban in 2025, prioritizing green vehicles.
  • Govt to develop infrastructure, increase tax threshold to boost revenue collection.
  • Sri Lanka's economic recovery faces threat from potential Israel-Iran conflict.
  • Rupee appreciation benefits people, helps EPF recoup losses.
  • 2024 budget proposes measures to improve tax compliance, changes to Unit Trusts.