Deaf Ears

Sri Lanka’s Central Bank is banging its head against the wall trying to convince a deaf government to raise fuel prices, as the exchequer groans under mountains of subsidy payments. Sri Lanka’s Central Bank is banging its head against the wall trying to convince a deaf government to raise fuel prices, as the exchequer groans under mountains of subsidy payments. Subsidy payments for fuel and flour have climbed up to Rs. 15.0 bn, while monopoly power supplier the Ceylon Electricity Board is limping with Rs. 27.0 bn in short-term debt.

As global oil prices cross the US$ 55 per barrel threshold, Sri Lanka is shying away from adopting market rates due to its political sensitivity and prospects of another general election later this year.

The net result: the Treasury owes Ceylon Petroleum Corp. (CPC) over Rs. 6.5 bn and Lanka IOC Rs. 4.4 bn in subsidy payments as at end March.

Monopoly flour miller Prima is owed another Rs. 4.0 bn.

Subsidies on flour and water came off in March, leading to speculation that price hikes for fuel and electricity are not far off.

In the meantime, CPC and CEB continue to bleed the Treasury incurring losses in total Rs. 2.5 bn each mon