An Echelon Media Company
Wednesday June 29th, 2022

Sri Lanka to supply only half the fuel demand in the near future: PM

ECONOMYNEXT – Sri Lanka will provide about 50 percent of the fuel demand in the next few weeks, giving priority for electricity and transport, and a credit line with India is expected to supply fuel for another four months, Prime Minister Ranil Wickremesinghe said.

“The current stocks can be used for 7 days,” Prime Minister Wickremesinghe said in a video statement.

“On the 16th (of May) a ship with 40,000 metric tonnes is coming. There are two ships, a petrol and diesel ship to come till the end of the month. For the next month we are taking action to get two more ships.”

“When we sign the Indian credit line we can get fuel for four months. All these will be given at a 50 percent basis.”

He said attempts were being made to speed up a credit line with India.

“From India we expect to sign a 500 million agreement for oil quickly. Our ambassador is going to India quickly to finish these matters.”

Sri Lanka is experiencing severe forex shortages from operating a soft-peg (targeting an exchange rate and simultaneously printing money to keep rates down or sterilize reserve sales).

“When we try to get fuel, we have to find dollars, there was no rupees at the Bank of Ceylon,” Wickremesinghe said.

“So I went to cabinet I got permission to print money, to give petrol. That is the situation with the economy. This is an example.”

Sri Lanka’s banks are facing liquidity shortages maturity mis-matches with the central bank injecting overnight rupees after intervening in forex markets to give dollars for imports or debt repayment.

The continued printing of money allow banks to give more credit without raising real deposits triggering forex shortages. Most private banks are also running overnight shorts re-financed by the central bank now.

Only a few foreign banks are not contributing to the forex crisis by not borrowing from the central bank, analysts say.

The central bank is also borrowing money from India and getting deeper into debt.

Sri Lanka’s rupee has fallen from 200 to 360 to the US dollar so far in 2021 and inflation has shot up to 39 percent in the worst currency crisis in the history of the island’s intermediate regime central bank. (Colombo/June14/2022)

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