The Central Bank’s recent remedial act of introducing a 100% cash margin with a view to contain pressure on the Sri Lankan Rupee against the Dollar is likely to accelerate the price of motor vehicles, importers said yesterday.
Speaking to the Sunday Observer, Chairman, Vehicle Importers’ Association of Lanka, Indika Sampath Merenchige said prices are expected to rise by the 8% value of Rupee depreciation from a minimum of Rs. 250,000 to Rs. 800,000.
“The Rupee depreciation coupled with the margin deposit requirement against Letters of Credit (LCs) is likely to create a supply freeze for motor vehicles in the next two months. This will automatically push prices upwards,” noted Merenchige.
On Wednesday, the Central Bank imposed a 100% margin deposit requirement against LCs opened with the commercial banks for motor vehicle imports for non-commercial purposes. The decision which came into immediate effect is based on recent developments which, if not addressed, could threaten macroeconomic stability, the Central Bank warned.
“The imposition of the margin deposit requirement, together with the measures already taken by the government with regard to taxes applicable on motor vehicle imports, is expected to curb non-essential imports of motor vehicles, and ease undue pressure on the current account of the balance of payments and the exchange rate,” the Central Bank highlighted. -AR