ECONOMYNEXT – Sri Lanka’s Ceylon Petroleum Corporation has lost 615.1 billion rupees in 2022 despite price hikes, with 527 billion rupees coming from a forex loss as the rupee collapsed, central bank data showed.
“Financial performance of CPC worsened further in 2022, largely driven by losses due to significant depreciation of the exchange rate, despite the cost reflective price revisions, which were mostly implemented in the second half of 2022,” the central bank said in its annual report.
The CPC’s operational loss was only 6.2 billion rupees in 2022 down from 41.3 billion rupee in 2021, “partially reflecting the impact of price revisions amidst notable fluctuations in global crude oil prices,” the central bank said.
The CPC ‘s dollar denominated loans and import bills were down to 0.2 billion US dollars by end 2022 after 2. 5 billion dollars of loans were transferred to the government. The loans were as high as 3.4 billion US dollars by end 2021.
The CPC borrowed from suppliers and state banks in previous years as forex shortages came from liquidity injections made to suppress rates under flexible inflation targeting, including during an International Monetary Fund program.
In a new IMF program, dollar loans by state enterprises without significant dollar inflows have been barred.
CPC was also owed 220 billion rupees from other state enterprises including Sri Lankan Airlines (49.3 percent) and the Ceylon Electricity Board (31.1 percent) up from 59.2 billion rupees a year earlier.
In 2021 CPC refinery was closed for 225 days as forex shortages made it difficult to import crude oil.
CPC is now being broken up to improve competition.
Sri Lanka’s economic bureaucrats have followed a policy of depreciating the currency especially from 1980 of depreciating the currency to reach a Mercantilist aim of ‘export competitiveness’.
Similar policies are peddled by Western Mercantilists to almost all unstable third world nations with soft-pegged central banks, but have been rejected by stable East Asian nations which became export power houses like Singapore, Thailand, Hong Kong and Vietnam.
Instead of gaining export competitiveness, the induced monetary instability has seen rising costs of goods, strikes, social unrest, never ending energy food price hikes and malnutrition as well as unmanageable central government and state enterprise budgets, critics say. (Colombo/May09/2023)