Sri Lanka fuel stabilization fund has not grown as expected: Minister
ECONOMYNEXT – A fuel price stabilization fund which was to collect 200 billion rupees in 2020 as global prices fell has not grows as expected due to fall in consumption and stocks already bought at high prices, Information Minister Bandula Gunewardene said.
“The fund has not grown as expected because consumption has fallen sharply,” Minister Gunewardene said.
“Also some of the stocks have been bought at higher prices earlier.”
Sri Lanka clamped down a sever lockdown using cufew laws over the past two months, leading to a collapse in consumption of goods and reduced transport.
He said a customs will charge a surcharge at the point of import and the funds will go to a account in state-run Bank of Ceylon, which will managed by six additional secretaries of the finance ministries.
The funds are expected to settle loans taken by the Ceylon Petroleum Corporation and Ceylon Electricity Board.
The reduced interest costs of CEB and CPC will bring down their operating costs over the longer term he said.
Sri Lanka’s CPC ran an 80 billion rupees loss in 2018 by running an unhedged forex loss via dollar borrowings despite market pricing fuel as the central bank injected liquidity in 2018 bringing down the rupee.
Analysts have also called for reform of Sri Lanka’s central bank so that it cannot print money in a monetary stimulus, permanently depreciate the currency, pushing up costs, driving cost of living up lowering living standards while also driving Sri Lanka closer to default.
A 2018 bought of money printing saw the rupee downgraded to ‘B’ despite improving budgets and market pricing of oil.
The latest bought of money printing coupled with tax cuts in the form of a fiscal stimulus, has brought the credit rating down to ‘B-‘. (Colombo/May28/2020)