ECONOMYNEXT – Sri Lanka’s top body representing automotive agents have warned that lack of spare parts from forex shortages are threatening to drive vehicles off roads and is also killing the last line of the business.
Sri Lanka’s central bank has triggered the worst forex crisis in the islands recent history by printing money to keep rates down, firing an import boom in areas beloved of ruling interventionists as credit picked up while depriving the people of vital items to keep the economy ticking.
The Ceylon Motor Traders Association (CMTA), representing vehicle agents (franchise holders) in the island said they found it difficult to open letters of credit to import spare parts.
Banks were generally prioritizing food, medicines and fuel, financial sector sources say.
“These unofficial strictions by banks have begun to cripple Sri Lanka’s vehicle fleet maintenance, which would have a direct impact on goods and people transportation as well as the overall economy,” the CMTA said.
“If the transportation sector grinds to a halt, that would have a severe impact on the main revenue lines of the country such as exports & tourism, which are heavily reliant on the availability of transport,” Ceylon Motor Traders Association,
“The franchise holders who have been battered by the import ban of almost two years, are now facing difficulties in managing their after sales operations, which is the only revenue stream left to sustain their staff and overheads.”
The CMTA said vehicle owners are resorting “dangerous patch repairs, usage of non-genuine spare parts”.
Others were using spare parts cannibalized from discarded cars overseas. Car owners say used parts have also doubled in price and the earlier ability to choose better parts has now been lost.
Analysts say Sri Lanka will have to steeply raise rates and float the currency to end central bank reserve sales for imports and re-establish a working monetary regime. (Colombo/Feb18/2022)