Sri Lanka to hike fuel prices in line with global market

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation will raise fuel prices in line with global trends, co-cabinet spokesman Minister Bandula Gunewardene said.

“If import prices are up fuel prices will have to be adjusted,” Minister Gunewardene told reporters. “Sri Lanka does not produce oil. Some products are already sold at a loss.

He said Lanka IOC, the second oil distributor in the country had already raised prices.

Gunewardne said an adjustment will be made to fuel prices to reflect costs and it was not necessarily on a price formula.

“It is not a formula, after taking into account costs, an adjustment will be made by the government,” he said.

Sri Lanka’s current administration came to power saying a monthly fuel pricing formula would be jettisoned.

The lack of market pricing force the CPC to borrow to cover losses, driving up credit demand and no correction is made in consumption, to reduce non-oil imports.

If policy rates or a call money rate is then kept down by injecting liquidity, the rupee falls.

However analysts pointed out that in 2018, the CPC ran an 80 billion rupee forex losses, effectively nullifying the price formula by borrowing dollars while having rupee deposits. (Colombo/Jan16/2020)