Cabinet Spokesman, Minister of Transport, Highways and Mass Media, Dr. Bandula Gunawardhana said that the Cabinet has decided to gradually lift vehicle import restrictions and expand the scope for the free import of all motor vehicles by February 2025 due to the increasing foreign reserves due to economic growth.
Dr. Gunawardhana said that the import of vehicles was stopped completely due to the foreign exchange and economic crisis in 2021. However, permission was given to import 1,000 motor vehicles for the tourism industry after the economy improved last year.
The Cabinet has approved the proposal presented by President Ranil Wickremesinghe as the Minister in charge of Finance to lift the restrictions on the import of motor vehicles from 2025 and lift import restrictions, following the increase in the rate of economic growth and foreign reserves.
This ban will be lifted in three phases from October 1, 2024.
The import of public passenger transport vehicles will be allowed under the first phase and the second phase will allow the import of vehicles used for commercial or cargo transportation from December. Vehicles including cars will be allowed for private use from February 1, 2025 under the third phase.
The import ban, introduced in March 2020, was aimed at curbing the outflow of foreign exchange amid the country’s deepening economic woes. With the lifting of this ban, Sri Lanka will begin importing motor vehicles again, starting in stages, as part of a broader economic recovery strategy tied to the Extended Fund Facility (EFF) program of the International Monetary Fund (IMF).
According to the Cabinet Memorandum, the phased lifting of restrictions will inject the much-needed energy into the auto industry and the broader economy, addressing challenges such as aging vehicles, declining fuel efficiency and rising maintenance costs.
The prolonged import restrictions had left Sri Lanka with an aging fleet of vehicles, characterised by declining roadworthiness and environmental concerns due to poor fuel efficiency. The import of new vehicles is expected to stimulate economic activity by increasing Government revenue, particularly due to vehicle imports, which have been a significant revenue stream for the country.
However, while the reintroduction of imports will put pressure on foreign exchange reserves, measures have been implemented to balance this, including additional duties on motor vehicle imports.
Sri Lanka’s commitment to the Paris Agreement’s Nationally Determined Contributions (NDCs) and its goal to achieve “Net Zero” by 2050 was also a key factor in the Government’s decision. The import policy will prioritise environment-friendly vehicles, with the introduction of stricter emissions standards, shifting from Euro 4 to Euro 6 compliance.
The policy will also promote electric vehicles, especially the local assembly of electric three- wheelers, while disallowing the import of petrol or diesel-powered three-wheelers, a category notorious for causing traffic accidents.
To further reduce the number of road accidents, which average 30,087 per year (primarily caused by motorcycles and three-wheelers), the Government has also included safety measures in its import policies.
Starting October 1, 2024, imports of motor cars, sports utility vehicles, motorcycles, and pickups will be limited to those less than three years. Public passenger and commercial vehicles will be limited to five years, while special purpose and defence vehicles can be up to ten years. Importers will be required to sell and register vehicles within 90 days of importation, with penalties introduced for any delays.
An annual licensing system will be introduced for importers, manufacturers, and traders to regulate the motor vehicle market and ensure they contribute to the national tax system.
