ECONOMYNEXT – Sri Lanka registered 2,300 SUVs and imported 10,000 tractors in 2021, data shows import controls prevented heavily taxed imports like cars and three-wheelers from entering the country.
Sri Lanka has banned imports of most automobiles, including three-wheelers and motorbikes which bring large revenues to the state, as money printing increased from February 2021 (monetary stimulus) creating currency shortages.
Meanwhile, imports of low-tax items, such as machinery and building materials, have been encouraged, including by artificially low interest rates, creating a vicious cycle of lost income and increased l money printing, which in turn creates more currency shortages.
Sri Lanka had registered 2,384 SUVs in 2021 and 176 in January 2022, Sri Lanka Vehicle Registry data analyzed by JB Securities, a Colombo-based equity brokerage show.
In January, 176 SUVs were registered.
“SUVscrossovers recorded 176 units in January, compared to 100 units the previous month, but compared to 199 units 12 months ago,” the research house said in a note to customers.
“Mahindra had 118 units thanks to its KUV 100 model, a small crossover vehicle assembled locally by Ideal Motors. Records also show the registration of 28 Toyota Land Cruiser jeeps – these were a gift from the Japanese government to the Sri Lankan police.
Disassembled vehicle components pay significantly lower tax rates, reducing state tax revenue.
Sri Lanka had also registered 8,067 large tractors and 2,116 small tractors in 2021.
Regardless of the administration in power, Sri Lankan policy makers and economists, steeped in mercantilist ideology, control trade after printing money to create currency shortages.
Then, a series of cascading political errors – also based on mercantilist dogma – including the banning of highly taxed items, worsens the economic crisis, leading the country to the collapse of the currency and the International Monetary Fund.
Meanwhile, Sri Lanka’s central bank governor Nivard Cabraal has suggested that people earning foreign currency abroad should be allowed to import cars and pay taxes in US dollars to the state.
As part of legal tender laws to encourage national currency, countries usually require citizens to pay taxes in national currency. However, when money is printed, causing outflows to exceed inflows, governments find it difficult to convert rupees into dollars to pay their overseas obligations.
Paying taxes directly into state coffers in US dollars does away with the middle stage.
In 2021, Sri Lanka imported US$1.66 billion in food and beverages, an additional US$418 million in wheat and maize.
In 2021, imports of machinery and equipment exceeded US$2.8 billion and construction materials exceeded US$1.2 billion. (Colombo/February 19, 2022)