The International Monetary Fund has confirmed that Sri Lanka has restored cost-reflective pricing for both electricity and fuel, completing a core commitment under the Extended Fund Facility (EFF) programme, IMF Mission Chief for Sri Lanka Evan Papageorgiou said.
Responding to a question from News 1st’s Zulfick Farzan on whether the Central Bank’s recent assertion on electricity pricing aligns with IMF programme benchmarks, Papageorgiou affirmed that cost recovery had indeed been achieved and described it as a central pillar of the country’s economic adjustment effort. He said implementation of the pricing adjustments was a key precondition for the IMF to proceed with the latest Executive Board review.
Papageorgiou acknowledged that global commodity and oil prices earlier this year had delayed necessary adjustments, opening a short-lived gap between actual costs and consumer tariffs and producing a temporary subsidy burden in both the electricity and fuel sectors. Corrective action in recent months has closed that gap. Fuel prices have been revised upward in line with global market rates, while electricity tariffs underwent a second increase averaging around 11 per cent as part of the prior actions tied to the combined fifth and sixth reviews of the IMF programme.
“These measures together have brought both fuel and electricity tariffs back in line with cost recovery levels,” Papageorgiou said, adding that current pricing formulas are now being applied as intended, ensuring sufficient revenue to cover production, import and operational expenses in the energy sector.
The IMF said the government has committed to continuing timely adjustments to petrol, diesel and electricity tariffs to reflect global energy costs. Papageorgiou noted that a temporary fuel subsidy introduced in April remains in place to cushion the impact of the recent price increases, that the subsidy is time-bound and that it has been factored into the national budget.
The confirmation arrives the same day Ceylon Petroleum Corporation Chairman D.J. Rajakaruna disclosed that CPC is losing Rs. 129 on every litre of diesel and Rs. 60 on every litre of Octane 92 petrol, with the Rs. 57 billion the government has allocated to support fuel pricing expected to be exhausted by end-June. The IMF Mission Chief had earlier in the cycle described the policy framework as “broadly appropriate” and the Central Bank’s forward-dollars role as the first line of defence against speculative pressure on the rupee.
