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Sunday December 10th, 2023

Lanka IOC raises fuel prices to record high

ECONOMYNEXT – Lanka IOC, the Indian Oil Corporation unit in Sri Lanka raised petrol and diesel prices by 50 rupees and 75 rupees from the mid night of Thursday after the island nation’s central bank’s flexible exchange rate resulted in near 30 percent depreciation in two days.

The central bank late on Tuesday announced a flexible exchange rate and the rupee was devalued 15 percent on Wednesday and the currency fell another 15 percent on Thursday after nearly. The central bank’s devaluation came after nearly 11 month it held the rupee artificially low at around 200 rupees.

The latest price hike will see the price of mostly used Octane 92 rising by 24.5 percent to a record 254 rupees a litre while diesel soaring 54 percent to a historic peak of 214 rupees.

The Lanka IOC has been raising fuel prices in line with the global market price. It has increased prices twice while the state owned Ceylon Petroleum Corporation (Ceypetco) kept the prices at the same level.

Sumith Wijesinghe, the chairman of Ceypetco on Thursday said the state-run fuel retailer is incurring a loss of 128 rupees from each litre of diesel as of March 10 and 80 rupee loss from a litre of petrol.

However, so far the government has not decided to fuel prices yet.

Ceypetco still maintains the per litre petrol price at 177 rupees while diesel at 121 rupees. As a result, many motorists turn to Ceypetco fuel stations resulting in huge queues amid fuel shortage across the country.

The CPC is facing a risk of heavy loss as the world crude oil price has been on the rise after the Russian bombing in Ukraine.

When prices are not raised and losses are financed with banks credit, which are in turn re-financed by the central bank through its 7.5 percent window, inflation goes up. The money printed to finance losses also creates forex shortages.

The dollar shortage has led to lack of fuel and extended power cuts, crippling many industries related to manufacturing and transport, disrupting the country’s economic activities. (Colombo/March10/2022)

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ADB USD200mn loan for Sri Lanka economic stabilization efforts

ECONOMYNEXT – The Asian Development Bank (ADB) has approved a US 200 million dollar concessional loan to Sri Lanka to help stabilize the country’s finance sector.

The Financial Sector Stability and Reforms Program comprises two subprograms of IS 200 million dollars each, according to a statement by the ADB.

“The program’s overarching development objective is fully aligned with the country’s strategy of maintaining finance sector stability, while ensuring that banks are well-positioned for eventual recovery,” ADB Country Director for Sri Lanka Takafumi Kadono was quoted as saying in the statement.

“The expected development outcome is a stable financial system providing access to affordable finance for businesses in various sectors of the economy.”

The ADB statement continues:

“Subprogram 1 targets short-term stabilization and crisis management measures that were implemented in 2023, while subprogram 2 is planned to be implemented in 2024 and focuses on structural reforms and long-term actions to restore growth in the banking sector.

The program will help strengthen the stability and governance of the country’s banking sector; improve the banking sector’s asset quality; and deepen sustainable and inclusive finance, particularly for women-led micro, small, and medium-sized enterprises.

According to the International Monetary Fund’s (IMF) latest review, Sri Lanka’s economy is showing tentative signs of stabilization, although a full economic recovery is not yet assured.

The program is a follow-on assistance from ADB’s crisis response under the special policy-based loan that was approved for Sri Lanka in May 2023.

It is aligned with the fourth pillar of the IMF’s Extended Fund Facility provided to Sri Lanka to help the country regain financial stability.

It is also in line with the government’s reform agenda, including strengthening the operational independence of the Central Bank of Sri Lanka (CBSL) and its designation as the country’s macroprudential authority.

In designing this subprogram 1 loan, ADB has maintained close coordination and collaboration with the IMF to design targeted regulatory reforms for the banking sector—including the asset quality review—and with the World Bank on strengthening the deposit insurance scheme.

“The loan is accompanied by a $1 million grant from ADB’s Technical Assistance Special Fund to provide advisory, knowledge, and institutional capacity building for Sri Lanka’s Ministry of Finance and CBSL.”

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Sri Lank in blackout as power grid hit by cascading failure

ECONOMYNEXT – Sri Lanka suffered a blackout as Saturday evening as the state-run Ceylon Electricity Board grid was hit by a cascading power failure.

The cascading failure is believed to have been triggered by the failure of the Kothmale-Biyagama transmission line.

“The Ceylon Electricity Board wishes to inform our customers that due to the failure of Kotmale – Biyagama main transmission line, an island wide power failure has occurred,” CEB Spokesman Noel Priyantha said.

“Step by step restorations are underway and it may take few hours to completely restore the power supply.”

With hydro plants running flat out, a outage of the line tends to create a big imbalance in the demand and supply, leading to tripping of more lines and generators.

Lines can trip due to lightening strikes, or equipment failures.

Sri Lanka last suffered a cascading failure in December 2021, due to the failure of the same transmission line.

RelatedSri Lanka power blackout as grid hit by cascading failure

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Sri Lanka to host regional Food and Agriculture Organization conference

ECONOMYNEXT – Sri Lanka will host the 37th session of the Asia Pacific Regional Conference (APRC) of the United Nations Food and Agriculture Organization (FAO), from February 19-22, 2024 in Colombo.

The Conference will bring together agriculture ministers and officials from 46 countries across the region to discuss challenges in food and agriculture.

“The 37th APRC will provide a vital platform for regional collaboration, benefitting the agricultural landscape, fisheries sector and environment of Sri Lanka,” Minister Mahinda Amaraweera said at a press briefing on Friday (8) to announce the conference.

FAO has had an active presence in Sri Lanka for over 40 years. “FAO has supported the country in the implementation of Good Agricultural Practices (GAP), and the development of the fisheries sector for growth and climate resilience,” Vimlendra Sharan, FAO Representative for Sri Lanka and the Maldives said.

“The APRC conference will be an opportunity to highlight the innovative approaches introduced in partnership with the government.”

By hosting APRC, Sri Lanka hopes to demonstrate the country’s dedication to the growth of sustainable agriculture, and showcase its commitment to sustainable agricultural development.

The APRC agenda will include a forum on agritourism, especially requested by the Sri Lankan government.

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