COLOMBO: Sri Lanka will impose a 100 percent margin deposit on letters of credit (LC) for motor vehicles with immediate effect to prevent dollar outflows further weakening the rupee.
Finance Minister Ravi Karunanayake announcing the measure on Friday said there will not be a margin for LCs and the importers have to pay 100 percent from today. He said there are more vehicles in the country than needed.
The loan to value ratio (LTV) for vehicles, however, will be increased back from 70 percent to 90 percent due to the imposition of the 100 percent margin deposit on LCs. The Central Bank last month imposed a 70 percent cap on loans and advances for vehicles to limit the dollars outflowing.
The measure is aimed at discouraging unnecessary vehicle imports and curtail the forex outflow as Sri Lanka’s gross official reserves declined to US$ 6.8 billion as at end July 2015.
The Sri Lankan rupee depreciated by 4.6 percent against the US dollar after the Central Bank decided to float it on September 4.
The Finance Minister also asked the Sri Lankan expatriates to bring back undeclared funds in Switzerland, to support dollar inflows into the country. He offered a considerable interest for the funds.
