June 18, Colombo (LNW): Sri Lanka has recorded a notable decline in foreign currency spending on vehicle imports following the introduction of higher import duties, according to Deputy Minister of Finance and Planning Anil Jayantha Fernando.
Speaking about the impact of the government’s recent policy measures, Fernando said daily foreign exchange outflows linked to vehicle imports have fallen to below USD 4 million, signalling a slowdown in import demand and a reduction in pressure on the country’s external finances.
He noted that interest in importing vehicles remained strong even after the revised tax measures were announced. At one stage, letters of credit valued at approximately USD 88 million were reportedly opened within a single day, reflecting significant market demand. However, he said the effects of the surcharge are now becoming increasingly evident.
According to official figures, Sri Lanka spent an average of around USD 5.5 million per day on vehicle imports during the previous year. That figure climbed to nearly USD 7 million per day in 2026 as importers accelerated orders and increased the value of letters of credit opened for vehicle purchases.
Despite this initial surge, authorities say the trend has since reversed. Data for June indicates that daily expenditure on vehicle imports has dropped considerably, suggesting that the temporary duty increase is helping to moderate demand and conserve foreign exchange reserves.
Government officials have defended the measure as a necessary step to safeguard economic stability while managing import expenditure. They argue that controlling non-essential imports remains important as the country continues its broader efforts to strengthen external reserves and maintain a stable balance of payments position.
The temporary surcharge, introduced on May 15, 2026, increased applicable Customs Import Duties by 50 per cent on a range of selected imported goods, including vehicles. The measure was enacted through an Extraordinary Gazette issued under the provisions of the Customs Ordinance and is expected to remain under review as authorities monitor its economic impact.
Economic analysts believe the coming months will provide a clearer indication of whether the policy can sustainably reduce import-related foreign exchange outflows while balancing consumer demand and government revenue objectives.