How the SL 🇱🇰 Government Manufactured a Dollar Crisis
⭕ Sri Lanka imposed a temporary 50% surcharge on vehicle Customs Import Duty from May 16, for 3 months.
⭕ The LC opening numbers revealed by Dr. Anil Jayantha:
May 07: USD 2.6 million
May 08: USD 4.6 million
May 11: USD 3.8 million
May 12: USD 4.28 million
May 13: USD 8.36 million
May 14: USD 11 million
May 15: USD 23 million
May 18: USD 17 million
⭕ The government’s intention was to delay vehicle imports by making them more expensive for three months. But the market reacted in the opposite direction.
⭕ Instead of waiting, importers rushed to open LCs. This panic response increased demand for dollars, added more pressure on foreign exchange, and further weakened the rupee.
⭕ This is the problem with shallow policy decisions. A tax or surcharge may look correct on paper, but markets do not always behave the way policymakers expect.
⭕ When secondary effects are ignored, the policy can backfire. In this case, the attempt to reduce immediate pressure may have created even more pressure in the short term.
⭕ This is becoming a repeated weakness in the NPP government’s decision-making process. Policies are announced with good intentions, but without properly considering market dynamics, behavioural responses, and long-term consequences.
⭕ Commercial banks in Sri Lanka are quoting the US dollar selling rate at Rs. 354 today.
Note: This is highly likely to be a temporary situation that may normalize within the next couple of weeks and settle around Rs. 320 - 330. It is similar to the reintroduction of the QR system: the policy itself may have been intended to manage demand, but the way it was introduced created uncertainty. As a result, people rushed to fuel stations which created panic, queues, and more pressure on the system instead of calming the situation.
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