Active Stocks
Fri Apr 19 2024 15:56:00
  1. Tata Steel share price
  2. 162.10 1.31%
  1. Tata Motors share price
  2. 963.20 -0.84%
  1. NTPC share price
  2. 350.90 -0.14%
  1. ITC share price
  2. 424.80 1.40%
  1. Power Grid Corporation Of India share price
  2. 281.70 0.54%
Business News/ News / World/  Sri Lanka acquires forex to buy fuel
BackBack

Sri Lanka acquires forex to buy fuel

Most people in Sri Lanka have been staying at home because of the lack of transport due to fuel shortage.

A woman reacts as she waits in a queue to buy kerosene at a fuel station, amid the country's economic crisis in Colombo, Sri Lanka, May 18, 2022. REUTERS/Adnan Abidi (REUTERS)Premium
A woman reacts as she waits in a queue to buy kerosene at a fuel station, amid the country's economic crisis in Colombo, Sri Lanka, May 18, 2022. REUTERS/Adnan Abidi (REUTERS)

The Central bank of Sri Lanka has acquired foreign exchange to pay for gasoline and cooking gas imports that will alleviate acute shortages, its governor said on May 19, as the prime minister indicated supplies had been locked in for at least a month.

As the island nation fights its most devastating economic crisis since independence in 1948, the majority of Sri Lanka's petrol pumps have run dry. Hundreds of people queued in queues clutching plastic jerry cans at several gas stations in Colombo's economic city, as troops in military uniform and armed with assault weapons patrolled the streets. There was very little traffic.

Residents said most people were staying at home because of the lack of transport.

Kanchana Wijesekera, Sri Lanka's Minister of Waters, Power and Energy, earlier told Parliament that the shipping company had refused to release the vessel unless both payments were made. According to newsfirst.lk, Wijesekera also acknowledged that the country was experiencing a petrol shortage.

“We do not have US dollars to make the payment for the vessel with petrol," he said, adding that another USD 53 million is due for the same vessel for a previous shipment in January 2022.

Also Read | Sri Lanka apologises to citizens, says no money to buy petrol

Central bank Governor P. Nandalal Weerasinghe told a news conference adequate dollars had been released to pay for fuel and cooking gas shipments, utilising in part $130 million received from the World Bank and remittances from Sri Lankans working overseas.

He was speaking after the Central bank held interest rates steady at a policy meeting, citing a massive 7 percentage point increase in April that it said was working its way through the system.

The country was more politically and economically stable, Weerasinghe said, adding that he would stay on in his post. He told reporters on May 11 he would resign in two weeks in the absence of political stability as any steps the bank took to address the economic crisis would not be successful amid turmoil.

Ranil Wickremesinghe, an opposition parliamentarian, was named prime minister last week and he has made four cabinet appointments. However, he has yet to name a finance minister.

Inflation could rise further to a staggering 40% in the next couple of months but it was being driven largely by supply-side pressures and measures by the bank and government were already reining in demand-side inflation, the Central bank governor added.

Inflation hit 29.8% in April with food prices expanding 46.6% year-on-year.

Sri Lanka's economic crisis has come from the confluence of the COVID-19 pandemic battering the tourism-reliant economy, rising oil prices and populist tax cuts by the government of President Gotabaya Rajapaksa and his brother, Mahinda, who resigned as prime minister last week.

Other factors have included heavily subsidised domestic prices of fuel and a decision to ban the import of chemical fertilisers, which devastated the agriculture sector.

TEST SUPPORT

The Central bank said energy and utility prices needed to be urgently revised, and analysts said Wickremesinghe's ability to push reforms through parliament and overcome public anger would be crucial.

"They need to bring in critical reforms and other measures to parliament to test their support and see if they really have consensus and stability," said Shehan Cooray, head of research at Acuity Stockbrokers in Colombo.

He added, however, that the situation had taken a turn for the better. "Given that there was a point where it was even difficult to find a governor, the fact that he has decided to remain is a good thing," Cooray said.

Wickremesinghe, speaking in parliament, said the government was working to release six fuel shipments that had arrived at Colombo's port.

"There are two petrol shipments among them but this will not end the shortages," he said, adding that supplies had been locked in only until mid-June.

"Our aim now is to reduce the lines and find a way to start a fuel reserve so even if a couple of shipments are missed there is fuel available."

However there is considerable opposition to him. Protesters agitating for the removal of the Rajapaksa brothers say he is their stooge.

On Thursday, hundreds of students marched through Colombo, holding black flags and chanting anti-government slogans.

One banner at the rally said: "Gota-Ranil Conspiracy Government Out! System Change."

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 19 May 2022, 03:50 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App