Slowing Journey

June 07, 2012 (LBO) – Sri Lanka’s motor car registrations fell 16.1 percent in the first quarter of 2012 to 12,496, with a steeper 23.3 percent fall to 4,246 in the month of March, official data show. Interest rates on leases, which are used to buy cars, had gone up steadily since the last quarter of 2011 and the rupee also fell steeply in March, pressured by earlier sterilized sales of foreign exchange by the central bank.

The slowdown in car registrations came ahead of a hike in vehicle taxes by the finance ministry.

On March 31, the finance ministry raised taxes on most vehicles, a standard Sri Lankan knee-jerk reaction to balance of payments crises which are triggered when credit is accommodated and rates manipulated with printed money by the Central Bank.

The most recent balance of payments crisis was partly caused by a sudden surge in credit taken by state energy enterprises to manipulate energy prices from the second quarter of 2011.

The sudden tax hike left many hopeful car owners who had scraped together money to buy a car in great difficulty, in a graphic demonstration of the economic uncertainty that a Sri Lankan citizen suffers in the country.

Sri Lanka’s ruling