Sri Lanka increases fuel prices to address its deteriorating economic situation

Asia-Pacific, News May 25, 2022 , by IRIA No Comments

Sri Lanka’s interim government has yet again increased the fuel prices across the island nation of 22 million to save the fractured economy.

Troubles in Sri Lanka’s weak and tourism-reliant economy became worse during the COVID-19 pandemic, which has translated into the worst inflation and political chaos in the last 70 years since its independence from the British. In the face of extreme public anger, Prime Minister Mahinda Rajapaksa resigned from the chair along with his whole cabinet after protesters torched the family house along with several other houses of his cabinet members and government allies.

After the PM Rajapaksa’s resignation, Ranil Wickremesinghe took charge as the Prime Minister along with a new cabinet. However, soon after taking the office he clearly warned his countrymen that hard economic decisions would be taken in order to stabilize the wrecked economy of Sri Lanka.

Sri Lanka relies heavily upon imported fuel and petroleum to fulfill its needs. Prime Minister Ranil Wickremesinghe said in a televised address last week that the nation urgently needs $75 million of foreign currency days to pay for essential imports including fuel and gas. He further said, “At the moment, we only have petrol stocks for a single day. The next couple of months will be the most difficult ones of our lives.”

The Power and Energy Minister of Sri Lanka Kanchana Wijesekera Tweeted on May 24 that petrol prices would increase by 20-24% while diesel prices would rise by 35-38% with immediate effect. Daily limits on how much each consumer can purchase will continue.

Sri Lanka’s state-owned Ceylon Petroleum Corporation (Ceypetco) raised petrol prices soon after the announcement was made. The latest hike will see the price of mostly used Octane-92 Petrol rising by 24.3% or $0.23 per liter. The Auto Diesel prices are jumping by 38.4% or $0.31 per liter. The only competitor Lanka IOC, a subsidiary of Indian Oil Corporation, is yet to announce a revision in prices.

ALSO READ: Sri Lankan Prime Minister Rajapaksa’s house torched, seven killed in violent clashes

This is the second increase in fuel prices in Sri Lanka since April 19. Sri Lankan economists blame the shortage of supplies behind skyrocketing fuel prices. Over the past few days, pictures of long queues of shoppers at various petrol pumps in Sri Lanka due to this fuel crisis have been circulating through the net.

*^{People stand in a queue to buy kerosene oil used in cooking stoves in Colombo following Sri Lanka’s declaration of a state of emergency over food shortages. (Image Credit: AFP)}*

An immense increase in the fuel prices would trickle down to increase the transportation cost and prices of essential goods even more. The annual inflation rate in Sri Lank rose to a record 33.8% in April compared with 21.5% in March, according to government data.

With worst inflation, violent protests, and political turmoil, many Sri Lankans are trying to flee the country through illegal sea routes. The Sri Lankan Navy said that it had apprehended 67 people attempting to illegally flee the country from the northeastern coast.