Sri Lanka’s central bank is looking at a proposal to allow persons who can bring foreign exchange abroad to import vehicles and pay taxes in dollars, Central Bank Governor Nivard Cabraal said amid concerns that the move may be discriminatory.
Sri Lanka’s central bank has printed large volumes of money to keep interest rates artificially low and finance the deficit which has blow apart the balance of payments, and import controls had been placed including in cars.
Restricting cars which bring large volumes of taxes, are one of several cascading policy errors that drive Sri Lanka into economic crises and high inflation as the balance of payments gives way, whenever the central bank prints money to suppress rates, critics have said.
He said there is a ‘bubble’ is developing in car prices which have soared. Leasing companies in particular are can be financing assets whose valued have been artificially pushed up as a result of money printing.
When a central bank prints money to suppress rates, the present value of long term assets go up, though in the case of cars, import controls have restricted supply in Sri Lanka.
“We now see a bubble in vehicle prices and through that there could be some harm to the (financial) system,” Central Bank Governor Ajith Nivard Cabraal said.
“So we have a proposal. If people can bring dollars to buy cars from foreign countries and pay the tax also in foreign currencies, then on one hand, we will have foreign inflows and on the other side we wil get the goods required for the country. ”
“We hope to inform the government on this. The government also could consider this and then we can take a decision. We have not decided yet.”
Economynext
Sri Lanka’s central bank has printed large volumes of money to keep interest rates artificially low and finance the deficit which has blow apart the balance of payments, and import controls had been placed including in cars.
Restricting cars which bring large volumes of taxes, are one of several cascading policy errors that drive Sri Lanka into economic crises and high inflation as the balance of payments gives way, whenever the central bank prints money to suppress rates, critics have said.
He said there is a ‘bubble’ is developing in car prices which have soared. Leasing companies in particular are can be financing assets whose valued have been artificially pushed up as a result of money printing.
When a central bank prints money to suppress rates, the present value of long term assets go up, though in the case of cars, import controls have restricted supply in Sri Lanka.
“We now see a bubble in vehicle prices and through that there could be some harm to the (financial) system,” Central Bank Governor Ajith Nivard Cabraal said.
“So we have a proposal. If people can bring dollars to buy cars from foreign countries and pay the tax also in foreign currencies, then on one hand, we will have foreign inflows and on the other side we wil get the goods required for the country. ”
“We hope to inform the government on this. The government also could consider this and then we can take a decision. We have not decided yet.”
Economynext
