Sri Lanka slams credit squeeze on three wheelers, cars
ECONOMYNEXT – Sri Lanka has slammed a credit squeeze on three wheelers, which has stepped into a breach left by a low-quality, highly regulated bus service and provided a better service to passengers, while literally creating millions of jobs.
Sri Lanka’s Central Bank giving effect to a budget proposal said banks would only be allowed to provide 25 percent of credit to the value of a three wheeler.
Sri Lanka has more than a million three wheelers on the road, with around several thousand registered each month.
Many of the newly registered three wheelers are now used by craftsmen like masons and carpenters for their own transport needs. The state taxes cars as much as 200 percent, putting even small four wheel cars out of reach of most working Sri Lankans.
Indian-made, mostly Bajaj three wheelers have become veritable Model T fords, giving working class people mobility.
Hundreds of thousands of three wheelers also provide cheap and quick transport for people to reach their destinations, especially to areas off the beaten track.
Due to government price regulations, there is virtually no buses operating after dark even in built-up cities, making three wheelers the only practical alternative for those who do not own a car.
Three wheelerd drivers have also drawn criticism for slowing traffic and erratic driving.
The Central Bank also cut credit to private cars to 50 percent from 70 percent; up to 70 percent of credit can be given for other vehicles.
Up to 90 percent credit can be given for commercial vehicles. Part of the reason for the credit squeeze, which applies to new and vehicles registered within an year, may be partly to restrict imports, according to some financial sector players.
Sri Lanka has been losing reserves and the rupee has collapsed because the Central Bank has been forced to print money to finance the budget deficit and keep interest rates down.
In January, the government pressured the Central Bank to print over Rs60 billion, which can generate forex reserve losses of over $400 million unless quickly mopped up by the Central Bank. (Colombo/Jan19/2016)