Supermarket shelves are empty and restaurants can’t serve meals, but Sri Lanka’s economic crisis is a bonanza for used car dealers, with vehicle shortages driving prices higher than a house in a nice area.
The island nation of 22 million is on the brink of bankruptcy, inflation is scorching hot and the government has banned a range of “non-essential” imports to save dollars needed to buy food, medicine and fuel.
In the auto market, this two-year ban has kept brand-new cars off local roads, forcing desperate buyers to pay some of the world’s highest prices for battered compact cars and no-frills family sedans.
Anthony Fernando spent a recent weekend cruising through storefronts on the outskirts of Colombo on behalf of his daughter, who has been trying to find an affordable set of bikes for almost a year.
“She thought prices would go down,” the 63-year-old told AFP, but now “she’s paying for hesitation.”
The prices have gone “beyond the reach of an ordinary person,” he said.
A five-year-old Toyota Land Cruiser has been offered online for a staggering 62.5 million rupees ($312,500) – triple the pre-ban price and enough to buy a home in a middle class Colombo neighborhood or a new luxury apartment downtown.
A 10-year-old Fiat five-seater with a broken engine that could be disassembled for parts elsewhere has been listed for $8,250 – more than double the average Sri Lankan annual wage.
“A car and a house are symbols of success,” says a grinning Sarath Yapa Bandara, the owner of one of the capital’s largest car dealerships.
“That’s why most people are willing to buy even at these high prices.”
– ‘Heavenly’ –
Owning a car remains a virtual necessity in Colombo’s congested streets, where a ailing bus and rail network has already struggled with overcrowding.
Taxi numbers have also fallen sharply, as drivers sell their taxis to take advantage of the staggering prices, and those still working charge double their old fares or more.
The story goes on
“You must have your own car,” said Udaya Hegoda Arachchi, another buyer preparing to bite the bullet at a dealership.
“Given the economic situation in the country, we cannot expect prices to drop anytime soon,” he told AFP.
Covid has sent Sri Lanka into a tailspin, drying up important revenues from tourism and overseas remittances.
In March 2020, the government enacted a sweeping ban on imports, including new cars, to prevent foreign currencies from leaving the country.
But the policy has failed to stem the outflow of dollars, instead leaving the nation struggling to procure critical goods.
Grocery retailers have rationed rice, restaurants have closed because they can’t find cooking gas, and utilities that can’t afford oil have imposed blackouts. Farmers have run out of fertilizer.
– Chinese Debt –
Rating agencies have warned Sri Lanka could soon default, although the government says it will honor its commitments. It is trying to renegotiate its Chinese debt with Beijing.
The import ban has also meant auto parts are in short supply, meaning drivers risk being stranded after a breakdown.
Ravi Ekanayake told AFP that his Colombo repair shop does a roaring trade with owners who can’t afford the astronomical cost of switching to a new vehicle.
“But parts are scarce. It’s a catch-22: you either get caught with an old car with no parts, or you don’t have the money to buy a new car.”
Financial analyst Murtaza Jafferjee said the prices also underscored a problem caused by excessive money printing by a cash-strapped central bank, with “too much money chasing too few goods.”
He said the prices also increased transportation costs and contributed to inflation, which hit a record 14 percent in December.
“When vehicles become unaffordable for a part of society, their activities are restricted. Then we will also see a loss of economic output,” said the CEO of JB Securities.
“We are on the brink of collapse and not many people realize the depth of the problem.”
aj / gle-stu / dan
Comments are closed.