The government has prolonged a 50% surcharge on vehicle import duties until December 31, 2026, as the country grapples with elevated inflation driven by global energy price volatility and geopolitical tensions.
Sri Lanka's government has extended a 50% surcharge on customs duties for imported vehicles through the end of 2026, the Finance Ministry announced this week. The measure, initially introduced on May 15 for a three-month period, will now remain in effect until December 31. The extension has been authorised under the President's powers under Section 10A of the Customs Ordinance, though the surcharge does not apply to vehicles for which letters of credit were opened on or before May 15, 2026.
The prolonged import duty surcharge reflects ongoing efforts to curb foreign exchange outflows from vehicle purchases as the country navigates challenging economic conditions. According to the Central Bank of Sri Lanka's August 2026 Monetary Policy Report, headline inflation has accelerated sharply from around 2% in the first quarter to above the central bank's 5% target level. The acceleration has been driven primarily by higher global energy prices, which have passed through to domestic fuel and electricity costs, with spillover effects across the broader economy.
The central bank attributes much of the inflation pressure to supply-side shocks, particularly heightened geopolitical tensions in West Asia since late February 2026 and associated commodity price volatility. Energy and transport inflation accelerated notably in the second quarter following upward revisions to fuel, electricity, and gas prices. Food inflation has also remained elevated due to rising transport costs and volatile prices for vegetables and fish in June. The central bank projects inflation will remain above target in the near term before moderating, contingent on easing geopolitical tensions and as the effects of monetary policy tightening introduced in May feed through the economy.
The central bank has flagged upside risks to its inflation outlook, citing uncertainty in global commodity markets and potential adverse weather conditions linked to El Niño patterns. Officials noted that inflation expectations remain broadly anchored around the target over the medium term, though vigilance is needed given the volatile external environment.
