Sri Lanka power utility needs reform, price revisions says IMF

Dec 03, 2007 (LBO) – The International Monetary Fund (IMF) has called for further reforms of Sri Lanka's state electricity utility which looks set to make a 20 billion rupee loss this year. Many of the losses in the Ceylon Electricity Board (CEB) were financed by loans from state banks posing a threat to the entire financial sector, the IMF warned in an assessment of the island economy after its annual consultation with the government.

The CEB has run up heavy losses as successive governments have not allowed it to raise electricity tariffs in keeping with increasing petroleum prices.

Several attempts to revive the CEB failed owing to opposition from labour unions as well as politicians to privatising the utility or reforms to make it more efficient and profitable.

An IMF statement said its directors welcomed recent government moves to reduce fuel subsidies that would help improve government finances.

"However, they called for timely measures to address the current financial imbalances in the Ceylon Electricity Board, including adjustment of electricity tariffs to cost-recovery levels accompanied by adoption of an appropriate safety net to protect the poor."

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