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Sri Lanka vehicle registrations hits 6-year low amid elections, peg collapse

ECONOMYNEXT – Sri Lanka’s vehicle registrations fell to 24,472 units in November 2019, the lowest since the June 2013 amid a collapsed of a ‘flexible exchange rate’ and election in November, an analysis of vehicle registry data compiled by JB Securities, a Colombo-based equities brokerage.

In June 2013, vehicle registrations fell to 24,415, down from 47,500 in January 2012 after rates were hiked and currency was floated after a rate cut and several months of liquidity injections triggered a balance of payments crisis.

In 2019 Sri Lanka is againt going through a credit slowdown and stagflation after a collapse of the island’s highly unstable soft-peg labeled a ‘flexible exchange rate’.

The peg has downward only disorderly market conditions (DMC) rule under an International Monetary Fund program but no sterilization restriction leading to little or no-credibility, analysts have aid.

The flexible exchange rate collapsed to 182 from 153 to the US dollar in 2018 amid high levels of excess liquidity injected to target a call money rate.

Restrictions were then slapped on vehicle imports. In 2019 a further blow to sentiment was delivered from suicide bombings by Islamist extremists in April.

However some restrictions on vehicle imports have been relaxed. Unlike other imports, vehicles provide large volumes of tax revenues due to high rates of taxation.

Motor car registrations fell to 2,030 units in November from 2,512 in October and 7.226 units in May 2018. In eh currency cycle liquidity injections began in March 2018, just as the economy was recovering from a 2015/2016 collapse of the peg to 153 to the US dollar from 131 to the dollar.

Motor cycle registrations fell to 18,540 units in November from 21,918 units in October and 22,273 units in November.

In March 2018, as money printing began 30,381 units were registered just as the recovery was starting.

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In November 638 crossovers and sports utility vehicles were registered down from 738 in October, 101 pick-ups down from 149, 158 light trucks down from 217 and 55 heavy trucks down from 101.

Registration of buses fell to 152 from 206 a month earlier. (Colombo/Dec25/2019)