Sri Lanka car registrations fell sharply amid currency, political crises

ECONOMYNEXT – New vehicle registrations had fallen sharply November and December when a political crisis gripped Sri Lanka and the rupee came under severe pressure, official data showed.

Sri Lanka’s vehicle registration fell to 4,990 in September from 7,003 in August when the rupee came under pressure for a second time in 2018 amid a build-up of unsterilized excessive liquidity mainly from foreign asset purchases after the peg strengthen from a run triggered in April.

Sri Lanka imposed restrictions on car and other goods imports as the currency came under pressure. (Sri Lanka controls imports in ‘Nixon-shock’ move to protect soft-pegged rupee.)

In October, registrations rose to 5,826 motor cars, while motor cycle registrations rose to 30,889 from 23,914 a month earlier. Motor cycle registrations had averaged around 28,000 to 30,000 in the preceding months.

A political crisis was triggered on October 26, by President Maithripala Sirisena generating uncertainty in the economy and money markets.

In November when the largest foreign exchange market interventions on 500 million US dollars were made and the statutory reserve ratio was also cut injecting liquidity, motor car registrations fell to 3,354 units.

In December motor registrations had dropped to 2,669. Registrations may not correspond exactly to imports, though car dealers attempt not to keep large stocks.

Total vehicle registrations had fallen from 44,036 units in October to 31,358 units in November and to 30,327 units in December.

Motor cycle registrations fell from 30,889 units in October to 22,373 units in November and 22,943 in December.

Sri Lanka’s rupee came under pressure from around April 2018 as the central bank stopped mopping up inflows in the first quarter and pumped the banking system of liquidity by an expansion of domestic assets purchases.





The rupee fell from 153 to 161 to the US dollars in the first run, and to 182 in the second run which followed a liquidity spike in August/September.

The falling rupee makes imports expensive compared wages and reduces living standards. (Colombo/Jan28/2018)

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