Aug 30, Colombo: Sri Lanka's Central Bank announced today that it has decided to impose a 100 percent margin deposit requirement against the Letters of Credit opened with the commercial banks for the import of motor vehicles as a measure to curb a possible rise in vehicle imports.
The Monetary Board of the Central Bank has observed that during the year 2013, the currencies of several trading partner economies have sharply depreciated against the Sri Lankan rupee.
As a consequence, there has been a growing possibility that importing motor vehicles into the country could accelerate in the period ahead and therefore the Monetary Board has taken the measure in order to deal with the emerging risk, the Bank said.
"The Central Bank believes that this trend should not be allowed to continue without a suitable response," the Central Bank said in a statement released Friday.
Accordingly, Letters of Credit for the importation of specified vehicle categories could be done only with a minimum cash margin of 100 percent, with immediate effect.
Imports of buses, ambulances, lorries and trucks are exempted from the requirement.
The Monetary Board has also decided to review the imposition of this margin after a period of six months.
Sri Lanka in early 2012 implemented tight monetary policy measures and slapped heavy taxes on motor vehicle imports to arrest the ballooning trade deficit which rose to nearly US$ 10 billion in 2011.