Sri Lanka should cut losses, bank credit to state energy utilities: CB Governor

Jan 02, 2013 (LBO) – Sri Lanka should cut losses and bank credit taken by Ceylon Petroleum Corporation and Ceylon Electricity Board with better pricing in 2012, Central Bank Governor Nivard Cabraal said. Currency depreciation not only increases the price of energy itself, but also destroys the real value of current salaries and lifetime financial savings.

Countries that market price energy daily have very low inflation of around 2 to 3 percent a year. Sri Lanka’s experienced some of the lowest inflation in its history from 2001 to 2003 when fuel prices were adjusted monthly.

But when an administration in power tries to adjust prices, sections of the elected rulers in opposition tend to oppose the move.

Sri Lanka does not have a mechanism to regularly adjust important energy prices, which are based mostly on imported petroleum and pass through cost to the economy quickly, due to state intervention in pricing.

A surge in unproductive credit to state energy utilities as a drought hit hydro power generation amid rising petroleum prices, worsened a credit bubble from mid 2011 eventually triggering a balance of payments crisis.

In early 2012 energy prices were raised as part of a packa