ECONOMYNEXT – More than 9,400 letters of credit (LCs) were opened to import new personal vehicles on the first day due to speculation despite Sri Lanka’s 50 percent surcharge on Customs Import Duty (CID) becoming effective, Deputy Finance Minister Anil Jayantha said.
The government imposed a temporary 50 percent surcharge on Customs Import Duty on new personal vehicles for three months effective from May 16, aiming to restrict imports and reduce the depreciation of the rupee currency.
Deputy Minister Jayantha said despite the new surcharge, the were 9,429 LCs opened on May 18, the first weekday when the new 50 percent surcharge was effective.
His comments come amid opposition claims that two companies have got insider information and ordered 4,000 vehicles by opening LCs on May 15 before the government’s announcement on the next day.
“This is totally wrong. There were only 1,782 letters of credit opened on that day,” Minister Jayantha told reporters at a media briefing in Colombo on Friday (22).
“This is a deliberate move to confuse the public and boost the vehicles prices artificially.”
“If the information had been leaked, how can the LCs opened under the new vehicle taxes will go to 9,429 on May 18?” he questioned stating that the number of LCs should be drastically low if the market has behaved rationally.
“This is mainly due to the behaviour of the vehicle importer and not because of information leak. This is purely due to speculation.”
Some analysts have pointed out the Central Bank’s failure to raise the monetary policy rates and mop up excess liquidity resulted from its dollar purchase from the market as the main reason for the higher vehicles imports at lower borrowing cost.
Following years of strict, crisis-induced bans on motor vehicle imports since 2020, Sri Lanka’s tentative relaxation of these boundaries in early 2026 triggered a massive, destabilizing surge in import expenditure that forced emergency state intervention.
In response to an unexpected US$ 2 billion spike in import costs over a two-month window, compounded by soaring global oil prices and severe maritime logistical delays stemming from the intensified armed conflict in the Middle East, the government imposed the temporary 50 percent surcharge on the existing 30 percent Customs Import Duty for vehicles.
This target-hardening measure applies a 50% levy on both general and preferential duty bases across public transport vehicles, passenger motor cars, station wagons, vans, and fully electric or hybrid models for a three-month period (excluding two-wheelers and three-wheelers), resulting in a net price inflation of roughly 15% for immediate buyers.
The primary policy objective behind this targeted fiscal shock is to explicitly protect the country’s dwindling external reserves, which dropped from US$ 7 billion in March to US$ 6.76 billion by the end of April, by forcing non-essential automotive buyers to postpone purchases.
This was to artificially compress the demand for foreign exchange to halt the continuous slide of the Sri Lankan rupee, which had rapidly depreciated by over 6 percent to more than 350 per US Dollar by May 21.
Sri Lanka opened LCs for 624,000 vehicles in the 16 months from January 1, 2025 to end April 2026, Minister Jayantha said.
The government has estimated that the country will have to spend around US$200 million every month for vehicle imports from the 50 percent surcharge imposed last week. (Colombo/May 22/2026)
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