Sri Lanka imposed a 50% surcharge on customs duties for imported vehicles on May 16, 2026, raising the base import duty from 30% to 80% before additional taxes, which push the total effective tax on cars above 100% [1, 2]. The government aims to discourage vehicle imports to reduce strain on the country's foreign exchange reserves amid ongoing currency depreciation.
The Sri Lankan rupee has weakened by 4.5% against the US dollar this year, pressured by the regional instability following the US and Israeli attacks on Iran that began in February 2026 [1, 2]. Energy prices have surged by more than one-third since the conflict started, leading to diesel and petrol rationing within the country [1, 2].
Sri Lanka is still recovering from its 2022 economic meltdown. It entered a $2.9 billion IMF bailout program to stabilize its finances [1]. Junior Finance Minister Anil Jayantha Fernando urged citizens to delay car imports for at least three months, saying, "Given the current pressure on foreign exchange, we want people to delay their imports (of vehicles) by three months" [1].
Central Bank Governor Nandalal Weerasinghe warned at the beginning of May that the rupee would continue its slide unless global oil prices fall or Sri Lanka drastically cuts energy imports. "The rupee would continue to slide unless global oil prices fell or Sri Lanka slashed energy imports," he said [1].
The government hopes reducing vehicle imports will ease foreign currency outflows and help stabilize the rupee. Meanwhile, energy cost pressures persist amid tight supply and rationing. The official surcharge on vehicle imports took effect on May 16, as the country balances economic recovery efforts with external shocks.
