RTL Today – Economic crisis: Fuel prices rise in Sri Lanka as energy crisis deepens
One of Sri Lanka’s biggest fuel suppliers hiked prices by 12% on Saturday as the cash-strapped island’s energy crisis deepened.
Lanka IOC, a fuel retailer which accounts for a third of the market, said it was raising the prices of diesel – commonly used by public transport – by 12% and petrol by 11%.
The increases came after prices rose 7% three weeks ago and will add upward pressure on inflation, already at a record high.
The island is in the grip of an economic crisis after the collapse of the tourism sector, a key source of foreign currency, following the Covid-19 pandemic.
The government imposed a broad import ban in March 2020 in an effort to save foreign currency.
The country is now suffering from widespread shortages, including of fuel, electricity, car parts and cement, with supermarkets forced to ration staple foods including rice, sugar and powdered milk.
Shortages pushed food inflation to 25% last month with headline inflation at 16.8%.
There was no immediate review of energy prices by state-owned Ceylon Petroleum Corporation (CPC), but most of its pumps have been out of fuel for days.
Energy Minister Udaya Gammanpila announced this week that he expected fuel shortages to ease in “days”, but warned that a sharp price increase was needed to maintain the viability of the deficit CPC.
Gammanpila said the CCP continued to hemorrhage and already had debts exceeding $3.5 billion. CPC’s loss for last year was $450 million, he added.
“Before, we lacked dollars to import oil. Now we don’t have the rupees to buy the dollars,” Gammanpila said.
Meanwhile, several thermal power plants have shut down, with the electric utility extending daily power outages to five-and-a-half hours a day from Friday.
Three international ratings agencies have downgraded the island’s rating since the end of last year over concerns it may not be able to service its $35 billion sovereign debt.
Sri Lanka has also requested more loans from Beijing to help it repay its existing Chinese debt, which accounts for about 10% of the country’s external borrowing.
Authorities have borrowed heavily from China for infrastructure projects in the past, some of which have ended in costly white elephants.