Sri Lanka raises tax on imported cars as Middle East crisis bites

Sri Lanka slapped a 50 percent surcharge on customs duties on vehicles Saturday in a bid to discourage imports and ease currency pressure stemming from the Middle East conflict.

The increase in taxes comes as the local rupee has sharply depreciated since the start of US and Israeli attacks on Iran, which prompted retaliation by Tehran.

"Given the current pressure on foreign exchange, we want people to delay their imports (of vehicles) by three months," Junior Finance Minister Anil Jayantha Fernando told reporters in Colombo.

Vehicle were charged a customs duty of 30 percent but several other taxes make the effective import tax on a car more than 100 percent.

Sri Lanka has increased energy prices by more than a third since the start of the Middle East war and has rationed diesel and petrol in a bid to reduce the import bill.

Official figures show that Sri Lanka's rupee has depreciated by 4.5 percent against the dollar so far this year.

Central Bank Governor Nandalal Weerasinghe told a parliamentary panel last week that the rupee would continue to slide unless global oil prices fell or Sri Lanka slashed energy imports.

Sri Lanka is emerging from its worst economic meltdown in 2022, when it ran out of foreign exchange to finance even the most essential imports such as food, fuel and medicines.

Since then, the country has been under a $2.9 billion IMF bailout programme.