ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation lost 45.1 billion rupees in the four months to April 2020, as the rupee collapsed and triggering losses on its unhedged dollar loans, official data showed.
Ceylon Petroleum Corporation (Ceypetco) lost had lost 11.8 billion rupees in 2019 as the rupee remained stable after a collapse in 2018.
In 2018 the CPC lost 106 billion rupees including an 80 billion rupee loss from forex losses.
Ceylon Petroleum Corporation is forced run unhedged dollar positions whenever the rupee comes under pressure from money printing.
Total debt due to state-run People’s Bank and Bank of Ceylon had reached 592.7 billion rupees by end April from 566 billion rupees in December 2019.
In earlier years it was funding losses through dollar borrowings but in 2018 it borrowed dollars despite having rupee deposits from a price formula in a remarkable turn of events, which analysts have dubbed a Nick Leeson-style affair.
In early 2020, the rupee fell to almost 200 to the US dollar from 182 to the Us dollar. As credit and imports fell the rupee has been allowed to appreciate to about 185 to the US dollar and the central bank has bought dollars in April to prevent further appreciation at that point.
Fuel sales had collapsed amid lockdowns with import prices also falling worldwide.
“CPC was in difficulty in reaping optimal benefits over the historically lower global oil price due to the reduction of demand of the petroleum products around by 18 percent to 1,790 million litres in first four months of 2020, compared to the demand of 2,117 million litres in the same period of 2019, the finance ministry said.
CPC has minimal dollar sales involving aviation fuel, but it is taking on billions of dollars in loans, which some observes suspect may be due to a Mercantilist belief involving exchange rates.
The CPC however had made an operational profit of 1.4 billion rupees in the first four months of the year, before forex losses, a finance ministry report said.
The Ceylon Electricity Board and SriLankan Airlines arrears had reached 148 billion rupees by end April 2020.
Total debt due to state-run People’s Bank and Bank of Ceylon had reached 592.7 billion rupees by end April from 566 billion rupees in December 2019. (Colombo/July14/2020)