Struggling Sri Lanka hit by sharp fuel price hikes

Sri Lanka’s largest private fuel retailer hiked diesel prices more than 40 per cent on Friday, compounding the hardship for ordinary people in the country’s worst economic crisis since independence.

The island nation’s 22 million people have already been reeling from weeks of shortages that have crippled public transport and caused long queues for petrol, food and medicine.

The cause has been a wide-ranging import ban as the government tries to stop the outflow of dollars in order to pay off debt after the pandemic torpedoed the vital tourism sector.

In its third hike in two months, Lanka IOC raised diesel to 252 rupees ($1.00) a litre from 177 rupees while high octane gasoline was up 50 rupees to 283 rupees ($1.08).

Official figures show that diesel prices have risen 78.2 per cent while gasoline is up 43.5 per cent since February 6. 

There was no immediate energy price revision by the state-run Ceylon Petroleum Corporation (CPC), but most of its pumps have been out of fuel. The few that were open saw long queues on Friday.

Overall inflation hit a record 16.8 per cent in January with food prices up 25 per cent. Supermarkets are rationing staple foods including rice, sugar and milk powder. 

In a bid to woo more foreign-exchange remittances from Sri Lankans abroad, the central bank on Monday announced “greater flexibility” in the exchange rate after depreciating the currency by 15 per cent.

Since Monday, the rupee has lost about a quarter of its value against the dollar. Official sources said Friday’s fuel price increase reflected the weaker rupee.

Sri Lanka’s foreign currency reserves had fallen to $2.0 billion by the end of February while it  has to repay $7.0 billion this year to service its external debt of $51 billion.