Sri Lanka’s new taxes on cars and luxury goods helped reduce imports last year and narrow the huge trade deficit, the central bank said on Monday.

The doubling of vehicle taxes from April last year and credit restrictions helped rein in imports, while Sri Lankan exports including tea and garments also recorded declines amid worsening world economic woes, the bank said.

“Although earnings from exports declined in 2012 along with the weakening of global demand, the deficit in the trade account of the balance of payments contracted in 2012,” the bank said in a review of the year’s trade.

Export earnings dropped to $9.77 billion, down 7.4 percent from $10.55 billion in 2011 while imports also slowed to $19.08 billion, down 5.8 percent from $20.26 billion. The trade deficit was down 4.1 percent to $9.31 billion.

Faced with a major balance of payments crisis in 2011, the government hiked car imports by up to 300 percent, stopped credit for luxury imports and allowed the local currency to depreciate sharply by nearly 20 percent.

The bank said Sri Lanka’s services sector had done well to increase earnings from tourism by 25 percent to $1.03 billion while remittances from Sri Lankans employed abroad jumped 16.3 percent to $5.98 billion in 2012.

However, the government is discuss borrowing another billion dollars from the International Monetary Fund this year after drawing down a previous $2.6 billion IMF bailout loan by the middle of last year, according to treasury officials.

A 2009 IMF bailout was secured when the island’s foreign reserves crashed to a dangerously low level of $1 billion, but Central Bank of Sri Lanka figures showed reserves of $8.35 billion by December 2012.

The government has revised down its growth forecast for 2012 from 7.2 percent to 6.5 percent. Sri Lanka’s economy grew 8.3 percent in 2011, up from 8.0 percent in 2010, the first full year after government forces crushed Tamil rebels. - AFP