Empower your business in Sri Lanka and internationally with Prifinance expert corporate and financial services. Streamline company formation and investment opportunities with our tailored advice and solutions.

Sri Lanka and India ratings could be hurt by oil subsidies: S&P

Apr 30, 2012 (LBO) - Sri Lanka and India could face credit downgrade if oil prices rise further and energy subsidies are not reduced, Standard and Poor's said in an Asia-Pacific report. "In India and Sri Lanka, we expect fuel and related subsidies to markedly worsen fiscal and external deficits unless subsidy levels fall," Standard & Poor's credit analyst Kim Eng Tan said in a statement.

"In the absence of offsetting positive developments, these sovereigns could see negative rating actions as a result."

Countries are most vulnerable to a downgrade if average oil price stay above 150 US dollars a barrel for more than a year which was now considered to be "only modestly likely", S & P said.

Now Brent crude is around 119 US dollars a barre.

Sri Lanka is now selling both diesel and petrol above cost but power is not fully market priced.

Petrol is sold at 149 rupees a litre when the refined product costs about 106 rupees in Singapore (129 US dollars a barrel). Diesel is sold at 115 rupees, barely above the refined price of 107 rupees in Singapore (132 US dollars a barrel).

But Sri Lanka does not have an automatic price formula to pass on oil costs immediatel

Notify of
Inline Feedbacks
View all comments
Would love your thoughts, please comment.x