Sri Lanka’s rapid rise in vehicle imports is now raising serious red flags. The Finance Ministry has warned that the post-ban import boom is draining dollar reserves faster than anticipated, putting essential imports and economic stability at risk. With $742 million worth of Letters of Credit opened in just five months, the Central Bank has been urged to act swiftly.
Sri Lanka’s Vehicle Import Boom Risks Depleting Dollar Reserves, Warns Finance Ministry
The Finance Ministry of Sri Lanka has raised the alarm over the accelerated pace of vehicle imports following the lifting of the long-standing ban earlier this year. In a direct warning to the Central Bank, officials stated that the surge could pose a serious threat to the country’s foreign currency reserves if not managed proactively.
According to a senior ministry official, Letters of Credit (LCs) worth a staggering US$ 742 million have been opened in just five months since the vehicle import restrictions were lifted in February 2025. This figure is already approaching the total import target of US$ 1 billion, indicating a pace much faster than anticipated.
The Finance Ministry has formally requested the Central Bank to closely monitor this trend and implement precautionary measures to avoid a deeper crisis. The concern lies in the potential outflow of US dollars, which could negatively impact foreign reserves, currency stability, and Sri Lanka’s ability to fund essential imports such as fuel, medicine, and food.
Officials caution that if the current import trend continues unchecked, it could place additional pressure on exchange rates and inflate import bills, further straining the economy already recovering from recent challenges.
Since the lifting of the ban in February, over 18,000 vehicles have been brought into the country, generating tax revenue of Rs. 220 billion. While this has contributed significantly to public coffers, it comes at the cost of depleting foreign exchange reserves.
The customs revenue target for 2025 stands at Rs. 2.1 trillion, with vehicle imports alone contributing over Rs. 1 trillion so far. However, the Finance Ministry stressed that revenue benefits must be balanced with economic sustainability and forex protection.
As the Finance Ministry urges swift intervention, all eyes are now on the Central Bank, which must now strike a balance between economic growth, foreign investment appeal, and the preservation of dollar reserves.
