Sri Lanka runs out of cash to buy fuel as currency crisis deepens

Earlier this month, Sri Lanka purchased 40,000 metric tonnes of diesel and gasoline from India’s major oil company Indian Oil Corporation to meet urgent energy needs.

File image shows Sri Lankans waiting in a queue to refill their cooking gas cylinders in Colombo, January 4, 2022. The Indian Ocean island nation is going through its worst crisis in decades, with people facing shortages of essentials like powdered milk, cooking gas and kerosene. AP Photo/Eranga Jayawardena

Dove: The Sri Lankan government admitted on Monday it had run out of money to buy fuel as pumps at most gas stations across the country dried up, deepening the currency crisis that has crippled the economy of the island nation.

Sri Lanka’s current economic situation is so dire that it does not even have enough US dollars to pay for two fuel shipments.

Two shipments of fuel arrived today but we are unable to pay for them, Sri Lankan Energy Minister Udaya Gammanpila said on Monday.

Last week, state-owned refinery Ceylon Petroleum Corporation (CPC) said it had run out of money to source supplies overseas.

The CPC suffered losses to the tune of USD 415 million in 2021 due to the sale of diesel at prices set by the government.

“I had warned of impending fuel shortages due to the dollar crisis twice in January and once earlier this month,” Gammanpila said.

The worsening foreign exchange shortage in Sri Lanka has had serious repercussions on the energy sector, which is largely dependent on fuel imports.

The fuel shortage has resulted in long queues at undersupplied pumps across the country. Gammanpila felt the only way out of this mess was to raise retail fuel prices.

The minister also urged the government to reduce tariffs on fuel imports to pass on the benefits to the public.

Earlier this month, Sri Lanka purchased 40,000 metric tons of diesel and gasoline from India’s major oil company Indian Oil Corporation to meet urgent energy needs from the economic crisis, compounded by depleted oil reserves. exchange.

India has been a committed partner and a true friend of Sri Lanka. The High Commissioner (Gopal Baglay) handed over a cargo of fuel of 40,000 MT by Indian Oil Company, according to a statement released by the Indian High Commission here.

India’s delivery of the fuel came amid news of Sri Lankan Finance Minister Basil Rajapaksa’s visit to India in a fortnight to formalize India’s economic relief package for the beleaguered country. to a severe currency crisis.

Last month, India announced a $900 million loan to Sri Lanka to replenish its depleted foreign exchange reserves and to import food, amid shortages of nearly all essential commodities in the country.

Earlier this month, a deal giving Sri Lanka a $500 million line of credit for fuel purchases was also sealed as part of the immediate economic relief package.

Sri Lanka’s economy is also experiencing a shortage of food and other basic necessities, which pushed inflation to a record 25% last month. Tourism, another key foreign exchange earner, has also seen a lull due to the pandemic.

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