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Thursday April 18th, 2024

Sri Lanka’s large engine car registrations slow to a trickle on luxury tax

ECONOMYNEXT- Registration of cars with engines larger than 1,600cc has nearly halted in December 2019, which requires a rethink of the tax regime, a brokerage said.

“Taxes on cars are via an excise duty based on engine capacity and a luxury tax of 60 percent above a value of 4 million rupees,” JB Securities Chief Executive Murtaza Jafferjee said.

“An illustration of the need for a rethink of the current policy is that during the month of December, only one new car (Toyota Camry) and four preowned cars (a Toyota Prius, two BMW 7 series and one Mercedes E300) were registered with engine sizes greater than 1,600 cc.

In the corresponding month a year earlier, 50 large engine cars were registered.

Sri Lanka revised the luxury tax in October and vehicle taxes in general in the budget, expecting 48 billion rupees more in revenue.

President Gotabaya Rajapaksa, who took office in November 2019, while campaigning had promised that he would implement a simple tax scheme on vehicle imports.

Overall, vehicle registrations were down to 25,291 in December from 30,327 a year earlier, but marginally up from 24,472 in November.

Vehicle registrations have fallen since 2018, when the central bank imposed temporary controls on imports of vehicles to counter a deteriorating rupee.
The rupee fell 20 percent in 2018.

JB Securities data showed that 2,057 cars were registered, down from 2,669 a year earlier, but marginally up from 2,030 in November. Among the total were 244 new car registrations, down from 264 in November and 352 in 2018.

Toyota was the market leader with 64.2 percent share in December 2019 followed by Suzuki with 15.9 percent.

Just three electric cars (of which two were Nissan Leafs) were registered in December, down from 14 in November and 5 a year earlier

Hybrid vehicle registrations fell to 317 in December from 390 in November and 1,057 a year earlier, with the market dominated by Toyota Axio, followed by the Suzuki WagonR.

SUV registrations fell to 650 units in December from 854 in 2018, but was up from 638 in November. The Toyota C-HR commanded a third of the market, followed by the Honda CR-V which had a 19 percent share.

Three wheeler registrations plunged to 882 in December from 1,332 a year earlier and 995 in November, with Bajaj remaining the market leader with a 96.7 percent share.

“It seems like the other players TVS, Mahindra and Piaggio are selling remnants of their stock and probably will temporarily exit the segment,” Jafferjee said.

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Sri Lanka’s discussions with bondholders constructive: State finance minister

ECONOMYNEXT – Sri Lankan authorities continue to engage all debt restructuring negotiations in good faith, within principles of equitable treatment among creditors, and with maximum transparency within the norms of such negotiations, State Minister of Finance, Shehan Semasinghe has said.

“It is standard practice, when a representative group of bondholders is formed, to entertain confidential discussions with such group and its appointed advisors. In the case of Sri Lanka, the Ad Hoc Group of Bondholders represents holders controlling more than 50% of the bonds, which make them a privileged interlocutor for Sri Lanka,” Semasinghe said on X (twitter).

“It is well understood that given the price sensitive nature of the negotiations, and according to market regulations, discussions with the Group and its advisors are to be conducted under non-disclosure agreements. This evidently restricts the ability of the Government to unilaterally report about the substance of the discussions.

“The cleansing statement, which was issued on the 16th of April, at the conclusion of this first round of confidential discussions with members of the Group, aims at informing the Sri Lankan people, market participants and other stakeholders to this debt restructuring exercise, about the progress in negotiations. It provides the highest possible level of transparency within the internationally accepted practices in such circumstances.

“As informed in this statement, confidential discussions held in recent weeks with bondholders’ representatives proved constructive, building on the restructuring proposals presented by both parties. During the talks both sides successfully bridged a number of technical issues enabling important progress to be made. Sri Lanka articulated key remaining concerns that need to be addressed in a satisfactory manner.

“The next steps would entail further consultation with the IMF staff regarding assessments of the compatibility of the latest proposals with program parameters. Following these consultations, we hope to continue discussions with the bondholders with a view to reaching common ground ahead of the IMF board consideration of the second review of Sri Lanka’s EFF program.”

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Sri Lanka rupee weakens at 301.00/302.05 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 301.00/302.05 to the US dollar in the spot forex market on Tuesday, from 299.00/10 on Tuesday, dealers said. Bond yields were broadly steady.

A bond maturing on 15.12.2026 closed stable at 11.30/35 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.05 percent up from 11.95/12.00 percent.

A bond maturing on 15.12.2028 closed at 12.10/20 percent down from 12.10/15 percent.

A bond maturing on 15.07.2029 closed at 12.25/40 percent.

A bond maturing on 15.03.2031 closed at 12.30/50 percent. (Colombo/Apr17/2024)

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Sri Lanka Treasury Bill yields down across maturities

ECONOMYNEXT – Sri Lanka’s Treasuries yields were down across maturities at Wednesday’s auction with the 3-month yield moving down 7 basis points to 10.03 percent, data from the state debt office showed.

The debt office sold all 30 billion rupees of 3-month bills offered.

The 6-month yield fell 5 basis points to 10.22 percent, with 25 billion rupees of bills offered and 29.98 billion rupees sold.

The 12-month yield dropped 4 basis points to 10.23 percent with 18.01 billion rupees of bills sold after offering 23 billion rupees. (Colombo/Apr17/2024)

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