Sri Lanka allows 80-pct financing of used cars amid import controls
ECONOMYNEXT – Sri Lanka has raised a ceiling on loan to value ratios allowing non-bank finance companies to provide a higher share of credit for older used cars as import controls imposed amid money printing.
The central bank in a direction to non-bank lenders said finance companies would be allowed to loan up to “80 percent in respect of registered vehicles which would have been used in Sri Lanka for more than one year after first registration.”
In April 2020, the central bank which regulates central bank said a loan could only be given up to 70 percent of a car used more than a year in Sri Lanka, and 90 percent for a car used less than a year.
Loan to value ratios for vehicles less than one year was set at 90 percent for electric vehicles, and 50 percent for electrical vehicles.
However in 2020 car imports were banned after money printing created forex shortages and triggered downgrades and other than some categories of commercial vehicles, motor car imports are banned.
The ban is still in place.
Used car prices have also inflated over 30 percent in some cases.
Analysts and economists have called for the money printing central bank to be abolished and a currency board re-established so that the exchange rate would be fixed, there would be free trade.
With the ending of discretionary or ‘flexible’ policy the population would be left in economic peace to carry out growth generating activities and the dependence on International Monetary Fund bailouts will end. (Colombo/Feb27/2021)