Sri Lanka runs out of cash to buy fuel how India is helping forex-starved nation

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Representative images.

The Sri Lankan government acknowledged on Monday that there was a shortage of cash to buy fuel as pumps at most filling stations across the country dried up, deepening the foreign exchange crisis that crippled the island nation’s economy.

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

On Monday, Sri Lankan Energy Minister Udaya Gammanpila said, “Two shipments of fuel have arrived today, but we are not able to pay for it.”

Last week, the state-owned refinery Ceylon Petroleum Corporation (CPC) said it lacked funds to procure supplies from abroad.

The CPC suffered a loss of 15 415 million in 2021 due to the sale of diesel at a price set by the government.

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

Sri Lanka’s growing foreign exchange deficit has severely affected the energy sector, which is largely dependent on energy imports.

There have been long queues at low-stock pumps across the country due to fuel shortages.

Gammanpila thinks that the only way out of this mess is to increase the retail price of fuel.

The minister also called for reduction of tariffs on fuel imports to convey the benefits to the people.

Earlier this month, Sri Lanka bought 40,000 metric tonnes of diesel and petrol from Indian oil major Indian Oil Corporation to meet emergency energy needs in the economic crisis due to depleted foreign reserves.

“India is a committed partner and a true friend of Sri Lanka.

The High Commissioner (Gopal Bagle) handed over 40,000 metric tonnes of fuel consignment to Indian Oil Company, “a statement from the Indian High Commission said.

India provided the fuel in the wake of the announcement by Sri Lankan Finance Minister Basil Rajapaksa of a visit to India to formally transform India’s economic relief package for a country facing a serious foreign exchange crisis.

Last month, India announced a 900 million loan to Sri Lanka to build up its depleted foreign reserves and import food amid a shortage of almost all essential commodities in the country.

Earlier this month, an agreement was also sealed to give Sri Lanka a USD 500 million credit line for fuel purchases as part of an immediate economic relief package.

Sri Lanka’s economy is also facing shortages of food and other necessities, pushing inflation to a record 25 per cent last month.
Tourism, another major foreign-exchange earner, has also seen stagnation due to the epidemic.

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