Sri Lanka targets imported cars, luxury goods as currency crashes 10%

The local currency has lost more than 10% of its value against the US dollar this year

Sri Lanka announced a raft of restrictions on Saturday in a bid to slow down imports of cars and luxury goods as the country faces a foreign exchange shortage.

The finance ministry banned the import of vehicles for all state institutions for one year and said public servants will not be allowed to import cars at concessionary duty rates for six months.

Banks were also ordered to restrict credit to finance the purchase of vehicles, air conditioners, perfumes, mobile phones and TV sets, among other luxury consumer goods.

The local currency has lost more than 10 per cent of its value against the US dollar this year. The dollar, which bought 155 rupees at the start of the year, has appreciated and was buying 170 rupees by Friday.

In August, the government substantially increased taxes on small cars to discourage imports, but officials said there was still pressure on foreign exchange reserves to finance big-ticket imports.

The central bank had warned that car imports had inflated the trade deficit by $700 million year-on-year to $4.9 billion for the first five months of 2018.