Sri Lanka has announced to allow import of vehicles in a phased manner starting from October 1, a decision that came after four years and as part of the island nation's efforts to keep up with the IMF conditions to restore its economy.

The ban would be lifted in three phases for public transport vehicles, commercial vehicles and private motor cars respectively as part of a broader economic recovery strategy tied to the Extended Fund Facility (EFF) programme of the International Monetary Fund (IMF), an official statement from the President’s Media Division (PMD) said on Friday.

The Cabinet approval granted to allow motor vehicle imports comes after four years of “stringent import restrictions” imposed to preserve the island nation's foreign exchange reserves during the acute economic crisis, the PMD statement said.

With the outbreak of COVID19 in 2020, Sri Lanka imposed import restrictions to preserve forex reserves as the need then was to use the depleting resource for essential imports such as medicine, fuel and food.

Depleted foreign reserves in April 2022 led to an unprecedented economic crisis in Sri Lanka, forcing the island nation to declare sovereign default, its first ever since gaining independence from Britain in 1948.

Sri Lanka is currently in negotiations with the IMF, which has made external debt restructuring conditional to the USD 2.9 billion bailout package being released in tranches.

“With the significant improvement in forex reserves and the strength of the rupee, the Cabinet of Ministers has decided to lift all vehicle import ban/restrictions by February 2025. This decision is part of our ongoing efforts to restore normalcy in the economy and meet the needs of our people,” Foreign Minister Ali Sabry said in a post on X.

Under the first phase, public transport vehicles would be permitted to be imported from October 1; the second phase will allow import of commercial vehicles from December 1, and under the third phase from February 1, 2025, motor cars for private use can be imported, the PMD statement said.

The import of new vehicles is expected to “stimulate economic activity by increasing government revenue, particularly from vehicle imports, which have historically been a significant revenue stream for the country,” it said.

As the reintroduction of imports will put pressure on foreign exchange reserves, extra customs duties will be imposed to minimise its impact, it added.

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