Crisis-stricken Sri Lanka cut fuel prices on Monday, the second cut in as many weeks, after the World Bank warned that the economy will shrink by an unprecedented 9.2% this year.
Colombo, Sri Lanka,UPDATED: Oct 18 2022 06:06 IST
Public transport was halted earlier this year due to a lack of diesel in crisis-stricken Sri Lanka. (File photo: Reuters)
By Agence France-Presse: Crisis-stricken Sri Lanka cut fuel prices on Monday, the second cut in as many weeks, after the World Bank warned the economy will shrink by an unprecedented 9.2% this year.
The Department of Energy said the price of gasoline will be cut by 40 rupees to 370 rupees ($1.02) per liter from Monday evening, after a similar 10% cut earlier this month.
But the price of regular petrol is still twice as high as it was before the start of the crisis last year, while diesel is three and a half times as high as in December 2021.
Earlier this year, motorists spent weeks trying to get fuel, adding to weeks of protests that forced President Gotabaya Rajapaksa to flee the country and shut down in July.
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Waiting at the pumps has been reduced to a few hours in recent weeks, but fuel is still strictly rationed due to an ongoing shortage of dollars needed to pay for essential imports.
Public transport also came to a standstill due to a lack of diesel, but services are now almost back to normal, although many fares – like rising prices for other services and goods – have doubled.
The official annual inflation figures reach almost 70%.
The latest cut in petrol and diesel came after the World Bank warned that the economic contraction will be worse than the 8.7% forecast by the Central Bank of Sri Lanka.
The World Bank said in its latest country update published last week that the economy will continue to contract next year. It expects a contraction of 4.2% next year.
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In addition to the Covid-19 pandemic and the war in Ukraine, Sri Lanka’s worst crisis since independence is also partly due to the sharp tax cuts Rajapaksa announced after he came to power in November 2019. The crisis forced the government to default on its $51 billion in external debt in April.
Rajapaksa’s successor, Ranil Wickremesinghe, has reversed some of the tax cuts and introduced new revenue measures.
The International Monetary Fund has tentatively approved a four-year bailout of $2.9 billion. But the package is subject to an agreement with creditors, including China, Sri Lanka’s largest creditor, to contain inflation and tackle corruption.