Sri Lanka raised electricity prices by 66% on Thursday, in a move the government hopes will persuade the International Monetary Fund to provide a bailout for its crisis stricken economy.
The increase, announced by Power and Energy Minister Kanchana Wijesekera, comes after the government raised electricity prices by 75 percent last year, and adds to the pain of Sri Lankans already struggling with inflation above 54% year-on-year in January and income taxes as high as 36% percent. “We know that this will be hard on the public, especially the poor, but Sri Lanka is caught in a financial crisis and we have no choice but to move towards cost reflective pricing,” Wijesekera told reporters. “We hope that with this step Sri Lanka has moved closer to getting the IMF programme.” An official at the monopoly Ceylon Electricity Board confirmed the scale of the price increase.
The IMF agreed to loan Sri Lanka $2.9 billion in September to overcome its worst financial crisis in seven decades, but the deal comes with conditions that include raising taxes, removing subsidies and cutting public sector debt. The government of President Ranil Wickremesinghe, who took over after mass protests against economic mismanagement ousted his predecessor last year, desperately needs the funds and has been courting multilateral agencies for support since taking office in July. Wijesekera said the price increase would help the power ministry offset the gap caused by the cessation of government subsidies from January, and also help better manage long-term fuel contracts.
The government hopes to reduce tariffs by July, when it plans to revise prices again, he said.
