ECONOMYNEXT – Sri Lanka is in talks with oil supplying countries to extend payments terms for up to one year, Treasury Secretary S R Attygalle said.
“This is nothing new,” Attygalle said. “Already the Ceylon Petroleum Corporation has credit from suppliers for 180-days and 270-days.
“Now we want to extend them for up to one year.”
A delegation made up of Treasury and Central Bank officials are now in the Middle East. State Minister for Money and Capital Markets Nivard Cabraal met senior government officials at Oman over the weekend.
Oman is the source of Murban crude used in CPC’s refinery.
Under the policy of Sri Lanka’s current administration, retail oil prices are fixed.
In 2020, the policy paid dividends as prices were kept up as crude prices fell. However with US money printing weakening the US dollar and a gradual economic recovery driving demand, oil prices are picking up.
The burden of import prices therefore ends up in the credit system as either CPC losses are funded by loans or petroleum taxes are cut and the, tax losses are financed by more borrowings.
In 2020, Sri Lanka spent 1,742 million dollars on refined petroleum products, down 35 percent from 2.7 billion US dollars in 2019 amid a lockdown and lower prices.
Crude imports for CPC’s refinery cost 583 million dollars down 39 percent from 970 million US dollars in 2019.