Excise duty hike on small cars was aimed at curtailing the ever increasing imports of 1000 cc or less engine capacity cars and easing the pressure on balance of payments and trade deficit as well as preventing the outflow of foreign exchange, the Central Bank announced on Friday.
Central Bank Governor Dr. Indrajit Coomaraswamy told a media conference in Colombo on Friday that small cars accounted for approximately 86 per cent of all motor vehicle registrations during the first two months of 2018.
60 percent of all motor vehicle registrations, for 2017 were accounted for by vehicles less than 1000 cc, he said adding that the unprecedented growth in the number of vehicles is likely to create vehicular congestion and environmental pollution. Explaining the gravity of the issue, he noted that vehicle imports contributed to half of the trade deficit of the country recently.
According to latest statistics, the trade deficit a couple of months ago stood at $ 715 million and the value of vehicle imports was $350 million, he disclosed. The value of small car imports has risen to $73.2 million in July 2018 compared to $20 million during the same period last year. According to Finance Ministry data, 45,000 vehicles with 1000cc engine capacity were imported from January to May.