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The Ceylon Motor Traders’ Association (CMTA) has called on the Government to abolish the existing 15% vehicle depreciation rule before the upcoming Budget 2027 or through it, insisting that the mechanism is driving significant revenue leakage and distorting competition in the vehicle import market.

At a detailed media briefing, CMTA representatives called for the immediate removal of what it describes as a ‘flawed’ mechanism, warning that the loophole in law could result in exceeding Rs. 120 billion in Government revenue leakage in 2026.

CMTA Chairman Andrew Perera outlining their recommendations to the Government said if immediate removal proved administratively difficult, to seek an interim, tiered system based on the age of the vehicle, similar to an earlier depreciation framework.

It suggested categories such as zero to six months and six to 12 months, with the maximum depreciation capped at around 10%, adding that this would improve revenue collection to the Treasury, reduce market distortions, and provide the industry with greater policy predictability.

The CMTA reiterated that the existing valuation mechanism was creating an ‘uneven playing field’ between authorised distributors importing brand-new vehicles and other import channels, whilst depriving the Treasury of substantial tax revenue.

Perera said the Association estimated revenue leakage at around Rs. 40 billion in 2025, a figure he described as ‘conservative’ as it covered only selected passenger car segments.

‘Data for January to July 2026 indicated leakage of around Rs. 54 billion,’ he said, putting the full-year figure on course to surpass Rs. 120 billion.

Perera said brand-new imports represented only around 30% of total vehicle imports, with the balance 70% entering through channels that benefit from the depreciation allowance.

CMTA Member and Ideal Motors Chairman Nalin Welgama traced the issue to Customs Gazette No. 1971/10, issued on 14 June 2016 under Section 101 of the Customs Ordinance, which values brand-new vehicles for Customs purposes based on the manufacturer’s invoiced transaction value.

As per the Gazette, non-brand-new vehicles, however, are valued at 85% of the transaction value of an equivalent brand-new vehicle in the country of export, excluding local taxes.

‘This allows vehicles that are ‘effectively new’ to qualify for a 15% reduced Customs valuation, simply by being briefly registered abroad before being exported to Sri Lanka,’ Welgama stressed.

Citing the UK as an example, he explained that a vehicle priced at £ 100,000 carries £ 20,000 in Value-Added Tax (VAT) locally, but becomes zero-rated once exported, reverting to its £ 100,000 base value. Applying the 15% allowance on top of that then brings the Customs valuation down to £ 85,000.

‘This is not a level playing field,’ Welgama said, pointing out that the Treasury was effectively collecting duty on only 85% of the vehicle’s underlying value.

Welgama called the current arrangement ‘exactly the kind of flawed regulation that must be corrected, otherwise, the Government stands to lose billions of rupees,’ describing it as an ‘extremely serious situation.’

He also said the issue had become particularly significant given the country’s foreign exchange constraints and the need to maximise Government revenue.

‘In some instances, the tax saving was not necessarily passed on to consumers, but could instead translate into higher margins for importers and also triggering ‘hawala’ style transactions,’ Welgama claimed.

Representatives of individual brands and members of the CMTA detailed the financial impact on specific models.

Perera, presenting Toyota figures in the absence of a company representative, said the Toyota Raize 1.2-litre could carry an estimated revenue leakage of around Rs. 2 million per vehicle, with roughly 8,900 units imported, which translates to an estimated Rs. 18.7 billion in foregone revenue.

He said similar calculations for the Toyota Yaris Cross and related models pointed to a combined leakage of around Rs. 12 billion.

Kia Motors (Lanka) Ltd., Chairman Mahen Thambiah said one Indian-manufactured Kia model priced at around Rs. 10-12 million was generating a tax advantage of nearly Rs. 1.5 million per vehicle through the depreciation mechanism. ‘With over 1,000 units imported over the past year, the potential revenue loss from that model alone is around Rs. 1.5 billion,’ he estimated.

Stafford Motor Company Ltd., Director Tarindra Kaluperuma, as the authorised Honda distributor, cited the Honda Vezel as another example. He said the Vezel is manufactured specifically for Japan’s domestic market, while the Honda HR-V is its export equivalent. However, it is the domestic-market Vezel, rather than the HR-V, that has flooded the Sri Lankan market.

‘Vezel brand-new units currently attracted around Rs. 10.6 million in Customs duty under the depreciation mechanism, compared with an estimated Rs. 13.4 million without the allowance, creating a gap of about Rs. 1.8 million per vehicle,’ Kaluperuma added.

DIMO PLC, which imports higher-end luxury vehicles and Sports Utility Vehicles (SUVs), said that for a vehicle valued at $ 50,000, the Government is losing up to Rs. 8 million in revenue per vehicle.

Its Group CEO Gananath Pandithage also pointed out that authorised distributors bear substantial costs through training, workshops, infrastructure, and after-sales networks, while some informal importers operate with little more than ‘a security guard and a phone number.’ He said the resulting tax advantage was often retained as additional margin rather than passed on to consumers. ‘They don’t even pay proper income tax even,’ Pandithage claimed.

Former CMTA Chairman Charaka Perera pointed to a decade of repeated changes to vehicle taxation, spanning hybrid and electric vehicle (EV) duty adjustments, the shift from value-based to engine-capacity-based taxation, the introduction of luxury taxes, a five-year import suspension and reopening, and more recent changes to Customs Import Duty, the Social Security Contribution Levy (SSCL), and additional surcharges.

He also cited fluctuating loan-to-value (LTV) ratios for vehicle financing moving from around 50% in early 2025 to 60%, back to 50%, and down to 40% by May 2026 as a further source of market uncertainty.

The CMTA stressed its objective is ‘not preferential treatment’ for brand-new vehicle importers, but a ‘uniform Customs valuation’ and duty regime applied to all market participants.

‘All we’re asking for is a stable and level playing field, where we have a uniform duty structure, for everyone who’s playing in the automotive sector,’ they reiterated. (CdeS)

The relationship between Sri Lanka and Japan extends well beyond sports. The two nations established diplomatic relations in April 1952, and over the decades have built strong links in development, education, culture, trade and people-to-people exchanges. Cricket is now emerging as a new and increasingly important bridge between the two countries.

While baseball has traditionally dominated Japan’s sporting landscape, cricket has steadily developed through the work of the Japan Cricket Association (JCA), which was established in 1984 and became an ICC member in 1995. Today, Japan has a growing network of senior, university and junior teams, with the JCA reporting around 5,000 players and approximately 15,000 annual participants. Its development strategy places particular emphasis on junior cricket, women’s cricket and expanding the game into new communities.

A major milestone in Japan-Sri Lanka cricket relations came in March 2024, when Sri Lanka Cricket (SLC) and the JCA headed by its CEO, Naoki Alex Miyaji signed a Memorandum of Understanding aimed at strengthening cooperation. The partnership provides a framework for collaboration, exchanges and the sharing of Sri Lankan expertise to assist Japanese cricket development. The relationship has subsequently developed into practical exchanges involving players, coaches and ground staff.

The partnership moved to another level in 2025 when Japan’s national team travelled to Sri Lanka for an important preparation tour. SLC arranged seven T20 practice matches against four Sri Lankan Under-19 teams, giving Japanese players valuable exposure to a country with a long-established cricket culture. The Japanese Embassy in Colombo described the visit as the beginning of a new era of ‘cricket diplomacy’, recognising sport as another vehicle for strengthening bilateral relations.

The exchanges have continued into 2026. Japan’s Under-19 National Academy toured Sri Lanka in August, playing five matches against Colombo-based representative sides and Western Province, winning three games. The JCA described the tour as part of the continuing partnership between the two national federations.

The importance of this relationship becomes even greater with the Aichi-Nagoya Asian Games 2026. Cricket will be played in Japan from 24 September to 3 October providing an unprecedented opportunity to show the sport before a Japanese home audience. Japan will compete alongside major Asian cricket nations, while Sri Lanka is among the leading teams entering the men’s competition. Japan’s own squad has been drawn alongside Afghanistan and Nepal, with Sri Lanka among the teams awaiting the knockout stage.

The Asian Games are also part of a much bigger international cricket story. Japan will host major international cricket activity in September, including the historic India-Japan T20 International at Sano on 22 September, a match linked to the 75th anniversary of India-Japan diplomatic relations. Such fixtures can give Japanese cricket unprecedented visibility across Asia.

The timing could hardly be better. Cricket is returning to the Los Angeles 2028 Olympic Games, with six-team men’s and women’s T20 competitions. The Olympic return gives countries such as Japan an opportunity to use the global platform to introduce cricket to new audiences and accelerate grassroots.

Over the decades, Japan has extended its support to Sri Lanka through landmark projects including the introduction of colour television, the Sri Jayewardenepura General Hospital, the new Parliament complex and the airport terminal. Today, Sri Lanka is returning that goodwill by helping develop cricket in Japan.

One of the major achievements has been the transformation of a baseball ground into a cricket venue under the guidance of Pallekele International Cricket Stadium curator Asitha Wijesinghe. The upgraded facilities have provided Japan with improved infrastructure to nurture young cricketers.

Sri Lanka has also been sending coaches and officials to Japan on a regular basis, while annual exchange programs have further strengthened ties between the two cricketing nations. Former Royal College cricketer, Voice of Asia Network Founder/Adviser Priyantha Kariyapperuma has played a key role as the Goodwill Ambassador for Cricket Development in Japan and Special Adviser to the Japan Cricket Association, helping bridge the partnership between the two countries.

Japan’s rapid progress is evident with its participation in the ICC Under-19 Cricket World Cup and its growing competitiveness among Asia’s leading cricketing nations. With both the men’s and women’s teams competing during the Asian Games in Japan, the partnership between SLC and JCA continues to produce encouraging results for the future of cricket in the region.

For Sri Lanka, this represents more than simply another cricketing partnership. Sri Lankan coaches, players, administrators and technical experts can contribute significantly to Japan’s development, while Japanese organisation, technology, discipline and infrastructure can provide valuable lessons for Sri Lankan cricket.

The future of Japan-Sri Lanka cricket therefore looks increasingly promising: from diplomatic friendship to cricket diplomacy, from player exchanges to the Asian Games, and ultimately towards an Olympic era in which cricket can become a truly global sport.

Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe yesterday cautioned that reserves cannot be accumulated at any cost, warning that excessive intervention can distort market signals, excessive monetary expansion can stoke inflation, and excessive reliance on external borrowing simply creates future debt-service obligations.

Delivering the opening remarks and keynote address at the inaugural Reserve Management Conference 2026 in Colombo, Dr. Weerasinghe said such measures undermine the very macroeconomic stability that reserves are meant to safeguard.

Sustainable reserve accumulation, he said, must ultimately be supported by sustainable external sector fundamentals, fiscal and monetary credibility, and backing from the broader macroeconomic policy framework. He said this is particularly important for emerging and developing economies, where reserve accumulation cannot be separated from wider policy choices.

The most sustainable strategy, in his view, is not simply to acquire reserves but to build an economy that naturally generates and retains foreign exchange while maintaining overall economic stability.

The Governor described foreign reserves as a country’s first line of defence against external shocks. He stressed they represent the nation’s savings rather than the Government’s resources, carrying, in his words, a very important responsibility for the institutions managing them.

Reserves provide confidence and policy space and enable countries to meet essential external obligations, he said. Their most valuable function, however, is buying time; time for policymakers to respond, for markets to stabilise, and for an economy to adjust without being forced into disorderly, unnecessarily painful corrections.

Dr. Weerasinghe held up Sri Lanka’s 2022 economic crisis as evidence of what happens when external buffers become inadequate. Critically low reserves constrained imports, complicated debt servicing, intensified exchange rate pressure, and stoked inflation, while confidence in the economy deteriorated and the policy space to respond to further shocks became severely constrained.

Since the crisis, he said, Sri Lanka has pursued macroeconomic stabilisation and structural reform, with the external sector strengthening substantially compared to the difficult 2022 to 2023 period. But he cautioned that reserve building is not a linear process, since external shocks can draw down accumulated buffers quickly, a volatility he said has been visible not only in Sri Lanka but across markets with relatively high reserve levels.

He argued that reserve adequacy can no longer be judged by a single conventional indicator such as months of import cover. It should instead be treated as a risk-management framework incorporating short-term external liabilities, debt-service requirements, capital flow volatility, contingent liabilities, exchange rate flexibility, and the probability and scale of potential shocks.

The relevant question, he said, is not how much reserves a country holds today but how resilient, accessible, and quickly mobilised those reserves are against a shock whose timing cannot be predicted. Countries facing a major reserve depletion, as Sri Lanka did, must rebuild with patience and discipline rather than urgency, he added.

Reserve managers today operate in a world shaped by geopolitical fragmentation, strategic competition, trade tensions, sanctions, volatile commodity prices, and unpredictable interest rate cycles, Dr. Weerasinghe said. The international financial system is becoming more fragmented, trade and investment patterns are shifting, and supply chains are being reconfigured.

Geopolitical developments can now be transmitted into financial markets almost instantaneously, he said. A conflict in one part of the world can affect energy prices globally, and a disruption to a major shipping route can affect inflation thousands of kilometres away, illustrating the degree of global interconnectedness reserve managers now face.

A change in monetary policy in a major economy can alter capital flows to emerging markets, while a single geopolitical announcement can move exchange rates, bond yields, and risk premia within minutes, he said. Geopolitical risk, in his assessment, can no longer be treated as external to the investment process; it has become integral to reserve management itself.

This fragmentation raises difficult, no-longer-theoretical questions for reserve managers, he said: whether reserves should stay concentrated in the deepest and most liquid markets or be diversified across jurisdictions, how to balance diversification against liquidity, and how much diversification is beneficial before it starts eroding liquidity and operational efficiency.

On currency composition, the Governor said the US dollar remains dominant in reserve management, with unmatched market depth and liquidity. Reserve managers are, however, right to examine the risks of excessive concentration in any single currency or jurisdiction.

Diversification has a role to play, he said, but should never become an objective in itself. A theoretically diversified portfolio that cannot be liquidated efficiently when markets are under stress offers little practical protection.

The more appropriate question, in his view, is what currency composition best supports the objectives and risk tolerance of a country’s reserves, a decision shaped by trade patterns, external liabilities, intervention needs, market depth, expected returns, and geopolitical exposure. There is, he said, no universal optimal currency composition.

Dr. Weerasinghe returned to the traditional three objectives guiding reserve management- safety, liquidity and return, noting that while these can often be balanced under normal conditions, the trade-offs sharpen considerably during periods of stress. Assets that look attractive in calm markets can behave very differently in a crisis.

A reserve portfolio, he said, is not a conventional investment portfolio like a private sector or commercial banks. The fundamental question is not how much return was earned, but whether the value and availability of reserves were preserved when they were most needed.

Liquidity carries what he called an option value: highly liquid assets may appear costly to hold during quiet periods, but that liquidity becomes extremely valuable once markets come under stress, contributing directly to a country’s overall stability and resilience.

Commodity, energy, and climate shocks deserve close attention, Dr. Weerasinghe said. For an energy-importing country such as Sri Lanka, a sharp rise in global oil prices can quickly increase the import bill, while geopolitical tension can simultaneously weigh on tourism and remittance inflows, a combination that is precisely the type of situation reserves exist to absorb.

Climate-related shocks warrant similar treatment, he said, citing Cyclone Ditwah last year as an example of a natural disaster becoming a full external sector shock affecting agriculture, infrastructure, tourism, imports, and fiscal conditions. Reserve adequacy frameworks, he argued, should increasingly plan for combinations of such shocks occurring together, rather than assessing each risk in isolation.

On gold, the CBSL Governor said the relevant question is not simply whether to buy it, but what role it should play within a reserve portfolio. Gold does not carry the credit risk of a sovereign issuer and has historically served as a store of value, factors he said have renewed central bank interest in the metal and contributed to its price gains in recent years.

Gold does not, however, offer the same liquidity characteristics as cash or highly liquid Government securities, he said. Its appropriate allocation must reflect each central bank’s own objectives, liquidity needs, risk tolerance, and portfolio structure, a principle he said applies equally to newer instruments such as digital assets and tokenised financial instruments. Innovation is important, he said, but should never come at the expense of the fundamental safety and liquidity that official reserves are meant to provide.

Reserve management has always been data-intensive, but the volume, speed, and complexity of information now available is unprecedented, Dr. Weerasinghe said. Real-time market data, automated analytics, advanced risk models, and artificial intelligence (AI) can all strengthen decision-making, helping managers identify patterns, monitor markets, and run scenario analysis.

These tools do not eliminate uncertainty, he cautioned. Models can fail, data can be biased, and algorithms trained on historical experience may not capture risks that emerge from structural change. His guiding principle: such tools should support the judgement of reserve managers, not substitute for it, with responsibility for official reserves remaining with people.

Dr. Weerasinghe set out four principles to guide reserve managers going forward. First, adequacy before optimisation: a reserve portfolio that is too small cannot be made safe simply by chasing higher returns.

Second, diversification should be purposeful rather than pursued for its own sake, based on clearly identified risks and objectives.

Third, geopolitical risk, including jurisdictional, sanctions, settlement, and counterparty risk, must be integrated into investment decisions rather than assessed solely through traditional financial metrics.

Fourth, reserve management must stay dynamic, since interest rate cycles, currencies, trade patterns, geopolitical relationships, and technology all keep changing, meaning today’s optimal portfolio may not be tomorrow’s.

Perhaps the most important lesson of recent years, Dr. Weerasinghe said, is that buffers must be built before they are needed. Reserve accumulation is easiest when confidence is strong, capital is flowing, and exports are growing, precisely the conditions in which institutions are tempted to assume good times will continue indefinitely.

That, he said, is why institutional discipline matters: reserves should be built in good times because good times do not last; in simple terms, building for a rainy day.

He closed by describing international cooperation as itself a form of resilience, recalling that Sri Lanka received support, particularly from the Reserve Bank of India, during its period of stress. Access to information, communication, and mutual understanding between central banks become especially valuable as the global financial environment grows more challenging, he said, urging delegates to use the two-day conference for candid exchange on what has worked and what has not, rather than formal presentations alone.

He left delegates with three closing messages: that reserve managers must broaden their definition of risk given how fundamentally geopolitical uncertainty has changed their operating environment; that building reserves is a long-term process requiring sound fundamentals, policy credibility, and institutional discipline, with no shortcut to sustainable accumulation; and that resilience cannot be created by any single asset, currency, model, or strategy, but only through adequate buffers, prudent diversification, strong liquidity, sound institutions, flexible policy, and international cooperation.

Sri Lanka’s official reserve assets fell 6.9%, or $ 431 million, in June, to $ 6.45 billion from $ 6.88 billion at end-May, according to CBSL data. Foreign currency reserves drove the decline, falling $ 407 million to $ 6.25 billion, while gold eased to $ 191 million from $ 216 million.

The CBSL estimated short-term net foreign currency outflows at $ 2.15 billion, with aggregate short forward and futures positions against the rupee, including swap forward legs, at $ 4.04 billion at end-June, though much of this is expected to be rolled over. The International Monetary Fund (IMF) subsequently revised Sri Lanka’s end-2026 Net International Reserves (NIR) target down to $ 778 million from $ 944 million, with NIR, usable reserves net of short-term liabilities and swap obligations, estimated to have turned negative.

The CBSL has since stepped up buying to rebuild reserves and meet the revised target, purchasing a record $ 579 million in August, the highest since January 2025, above prior highs of $ 461 million in February 2026 and $ 356 million in August 2025. Net purchases for the first eight months of 2026 topped $ 1.48 billion, against $ 2 billion for all of 2025.

The scale marks a departure from past balance of payments crises, when the CBSL was typically a net seller, drawing down reserves to defend the rupee, an approach that left reserves depleted and the currency under renewed pressure once intervention capacity ran out. Buying was uneven through the year: the CBSL sold $ 12.9 million and $ 211.3 million in April and May, respectively, as the rupee fell sharply, before buying resumed in June ($ 70.5 million), then July ($ 348.6 million) and the August record.

The rupee’s year-to-date depreciation widened from a marginal 0.2% appreciation at end-February to 2.9% by end-April as the Middle East conflict escalated, then to a 7.9% peak by end-June, before easing to 5.5% by end-August; it had depreciated 5.6% over all of 2025. Continued CBSL buying implies further depreciation pressure ahead, with the IMF saying the exchange rate should be allowed to absorb external shocks rather than be controlled.