Sri Lanka slashes fuel prices after IMF bailout, says minister

Sri Lanka’s government has announced cuts in fuel prices, providing relief for many after a year of shortages and skyrocketing prices amid the country’s worst economic crisis.

Minister of Power and Energy Kanchana Wijesekera on Wednesday told reporters that different categories of petrol and diesel will be sold at prices from 8 percent to 26 percent lower starting from midnight, the Associated Press reported.

He said the price reduction is in line with an agreement with the International Monetary Fund, which includes adjusting fuel subsidies and prices based on production costs and global oil prices.

Sri Lanka earlier this month secured approval of a $2.9bn IMF bailout programme – a key step in its recovery from a crisis brought on by the pandemic and other troubles.

Last year, severe shortages of food, medicine and fuel led to street protests that forced then-President Gotabaya Rajapaksa to flee the country and resign.

In a related development, petroleum industry trade unions opposing a government decision to give licences to three companies from the United States, Australia and China to run fuel stations in Sri Lanka are threatening to strike.

The unions are protesting a plan to partially privatise the government-owned Ceylon Petroleum Corporation, which currently only faces competition from the Indian Oil Corporation.

People rushing to beat a possible strike lined up near fuel stations, fearing the supply would run out.

Wijesekera said even though the strike had caused some disruptions, the military was helping to ensure normal operations. Any shortages were due to dealers not ordering enough fuel because they were anticipating a price cut as part of a monthly revision in April.

The government plans to get out of business and privatise key semi-state-owned companies to raise revenue to build its reserves and resume payments of foreign debt.

Some opposition political parties and trade unions oppose the idea, contending that selling off state resources might compromise national interests.

Last year, Sri Lanka suspended repayment of about $7bn of its foreign debt that was due in 2022. Sri Lanka’s creditors have agreed to restructure its debt, in addition to the IMF bailout.

President Ranil Wickremesinghe has said that giving up the IMF programme would compel cash-strapped Sri Lanka to repay $6bn-$7bn a year until 2029.