How Sri Lanka's Economic Crisis Has Led To Used Cars Costing More Than A Luxury Flat

Can you imagine a luxury flat costing less than a used car? Sounds crazy, right? But that's exactly what's happening in India¡¯s neighbouring country Sri Lanka. The reason? Sri Lanka¡¯s economic crisis.

The Import Ban

Since the past few months, Sri Lanka has been inching closer towards bankruptcy this year, with inflation shooting up and the government refraining from ¡®non-essential imports¡¯ to save dollars needed to purchase food, medicine and fuel.

Amidst the various things banned from import, there¡¯s a two-year ban on new cars¡¯ import effective since March 2020, which means factory-fresh automobiles will be off local roads.

The result? This import ban on new cars has pushed up prices for used cars, even to the limit that they are costing more than some homes. All this has turned out to be a bonanza for second-hand car dealers.

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Used Car Prices Higher Than Luxury Flat

A 5-year-old Toyota Land Cruiser, for instance, was reportedly on offer online for an eye-watering 62.5 million rupees, i.e. close to $312,500, which is triple the pre-ban rate, and is certainly enough to buy a house in a middle-class Colombo neighbourhood or even a new luxury apartment in the city centre!

Even a decade-old Fiat five-seater with a busted engine, which might be stripped for parts elsewhere, was listed at $8,250, which is more than twice Sri Lanka's average yearly income!

In the traffic-snarled streets of Colombo, car ownership remains a virtual necessity, with the ramshackle bus and rail network already struggling with overcrowding.

Also, the number of taxis has also fallen sharply, with drivers selling their cabs to cash in on the crazy prices. Whereas those still working are charging double their old fares or more.

Reasons Behind The Crisis

AFP

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The last 2 years of Covid have sent Sri Lanka into a tailspin, resulting in the drying up of all-important earnings from tourism and foreign remittances.

From farmers running out of fertilizer, food retailers rationing rice to restaurants shutting down due to unavailability of cooking gas, everything has been happening in the crisis-hit country.

Besides the huge Chinese debt, reasons such as high government spending, tax cuts leading to erosion of state revenues and record low foreign exchange reserves have compounded this economic meltdown.

But as per Sri Lanka¡¯s government, it will meet its commitments and is trying to negotiate its Chinese Debts with Beijing, although various rating agencies have reportedly warned them that it might default soon.

With the situation showing no signs of improvement, it remains to be seen how Sri Lanka battles out of this economic crisis, which has pushed it on the verge of being bankrupt.

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