ECONOMYNEXT - Sri Lanka's new vehicle sales fell to 55,844 units in October 2015 from 64,020 in September, but remained higher than the August level of 51,161, an analysis of vehicle registry data showed, when confused administrative controls led to panic buying.
Sri Lanka's monthly vehicle registrations fell to 41,161 in August from 62,221 when the Central Bank and Treasury announced a series of confused administrative controls, which led to a surge in sales to 64,020, a market response to State interventions known as an 'announcement effect'.
In October 10,288 cars were sold, down from a peak of 14,544 in September but was the second highest monthly sales in history, an analysis of vehicle registry data by J B Securities, a Colombo-based equities brokerage shows.
Sri Lanka is facing a balance of payments crisis with the Central Bank printing money to keep interest rates down and finance a budget deficit, firing excess demand which is spilling over into credit and imports such as cars.
Instead of tightening policy by ending money printing, by allowing credit markets to work, the Central Bank slapped an administrative control on car credit by reducing the loan to value ratio to 70 percent.
It has since the level has again been raised again to 90 percent following a request from the Finance Minister. The 70 percent limit is expected to come into effect from December.
Sri Lanka's customs also raised the valuation of motor cars, to clamp down on suspected under-invoicing, which is will come in to effect from October 18, JB Securities said.
Sri Lanka's monetary policy regressed into greater administrative controls involving credit ceiling and interest rate ceilings during the Rajapaksa regime as money printing fired two balance of payments crises.
Analysts who saw car credit rising earlier than the Central Bank warned that it was a symptom of a bubble, but they say the bubble can spread to other areas such as property and car credit is a symptom of the malady, and not the disease.
Unlike vehicle leases which can be auctioned fairly easily, property bad loans have a far longer and deeper damaging effect on credit systems.
Bureaucratic credit allocation decisions show a dangerous regression into a mix of administrative controls and fiscal dominance that is characteristic a backward monetary policy regime that exists in some third world countries EN's economics columnist Bellwether says.
Administrative controls and fiscal dominance and central bank re-financed rural credit was widespread in the bad old days of the 1980s, when loose monetary authority helped undermine an 'open economy' in the eyes of public and deny its benefits to the poor by depreciating the currency.
Sri Lanka's rupee continues to be under heavy pressure from printed money, despite the easing of car imports and raising 1.5 billion US dollars from a sovereign bond.
In October however three wheeler sales, which is heavily dependent on credit fell to 8,115 units from 12,406 units in September amid the credit limit confusion. Mini truck sales, another credit driven category fell to 1,092 from 1,531.
Sales of Suzuki-Martu Alto, Sri Lanka's best-selling car fell to 5,224 units from 8,024 in September.
JB Securities says the LTV limit or bunching of deliveries was the reason for the September surge. The waiting time for the Alt is now 4-6 months.
Sri Lanka's monthly vehicle registrations fell to 41,161 in August from 62,221 when the Central Bank and Treasury announced a series of confused administrative controls, which led to a surge in sales to 64,020, a market response to State interventions known as an 'announcement effect'.
In October 10,288 cars were sold, down from a peak of 14,544 in September but was the second highest monthly sales in history, an analysis of vehicle registry data by J B Securities, a Colombo-based equities brokerage shows.
Sri Lanka is facing a balance of payments crisis with the Central Bank printing money to keep interest rates down and finance a budget deficit, firing excess demand which is spilling over into credit and imports such as cars.
Instead of tightening policy by ending money printing, by allowing credit markets to work, the Central Bank slapped an administrative control on car credit by reducing the loan to value ratio to 70 percent.
It has since the level has again been raised again to 90 percent following a request from the Finance Minister. The 70 percent limit is expected to come into effect from December.
Sri Lanka's customs also raised the valuation of motor cars, to clamp down on suspected under-invoicing, which is will come in to effect from October 18, JB Securities said.
Sri Lanka's monetary policy regressed into greater administrative controls involving credit ceiling and interest rate ceilings during the Rajapaksa regime as money printing fired two balance of payments crises.
Analysts who saw car credit rising earlier than the Central Bank warned that it was a symptom of a bubble, but they say the bubble can spread to other areas such as property and car credit is a symptom of the malady, and not the disease.
Unlike vehicle leases which can be auctioned fairly easily, property bad loans have a far longer and deeper damaging effect on credit systems.
Bureaucratic credit allocation decisions show a dangerous regression into a mix of administrative controls and fiscal dominance that is characteristic a backward monetary policy regime that exists in some third world countries EN's economics columnist Bellwether says.
Administrative controls and fiscal dominance and central bank re-financed rural credit was widespread in the bad old days of the 1980s, when loose monetary authority helped undermine an 'open economy' in the eyes of public and deny its benefits to the poor by depreciating the currency.
Sri Lanka's rupee continues to be under heavy pressure from printed money, despite the easing of car imports and raising 1.5 billion US dollars from a sovereign bond.
In October however three wheeler sales, which is heavily dependent on credit fell to 8,115 units from 12,406 units in September amid the credit limit confusion. Mini truck sales, another credit driven category fell to 1,092 from 1,531.
Sales of Suzuki-Martu Alto, Sri Lanka's best-selling car fell to 5,224 units from 8,024 in September.
JB Securities says the LTV limit or bunching of deliveries was the reason for the September surge. The waiting time for the Alt is now 4-6 months.
No comments:
Post a Comment