Surge in Vehicle Imports Hits Sri Lanka’s Current Account

Sri Lanka's central bank reported a current account deficit in September, driven by a surge in car imports. This marks a reversal from the surplus maintained from January to August. The vehicle import expenditure crossed USD 2 billion, catalyzed by a USD 286 million increase in September alone.

The reintroduction of car imports in February 2025 ended a five-year hiatus instituted due to foreign exchange shortages and the island's looming economic challenges, including the sovereign default declared in April 2022. With essential shortages prompting public uproar, Sri Lanka sought support via a significant Indian credit line and rigid IMF conditions.

As of September's end, the nation held USD 6.2 billion in reserves. Meanwhile, the Sri Lankan rupee fell nearly 4% against the US dollar across ten months. Notably, total vehicle registrations soared to 48,798 units in September, coinciding with a surge in motor car registrations, indicating a marked increase in automotive demand.