Forex-starved Sri Lanka runs out of cash to buy fuel

The Sri Lankan government on Monday admitted it ran short of cash to buy fuel as pumps at most filling stations across the country ran dry, deepening the foreign exchange crisis that crippled the island nation’s economy. Is. Sri Lanka’s current economic situation is so dire that it does not even have enough US dollars to pay for two shipments of fuel. Sri Lanka’s Energy Minister Uday Gammanapila said on Monday that two shipments of fuel had arrived today, but we were unable to pay for it.

Last week, state-owned refinery Ceylon Petroleum Corporation (CPC) said it did not have money to buy supplies from abroad. The CPC suffered a loss of USD 415 million in 2021 due to the sale of diesel at the prices set by the government. “I warned twice in January and earlier this month about impending fuel shortages due to the dollar crunch,” Gammanpila said. Sri Lanka’s worsening foreign exchange crunch has severely affected the energy sector, which largely depends on imports for fuel.

Fuel shortage has led to long queues at low-stock pumps across the country. Gammanpila conceded that the only way out of this mess was to increase the retail prices of fuel. The minister also urged the government to reduce the customs duty on fuel imports so that the benefits can be passed on to the public. Earlier this month, Sri Lanka bought 40,000 metric tonnes of diesel and petrol from Indian oil major Indian Oil Corporation to meet urgent energy requirements in an economic crisis caused by depletion of foreign reserves. India is a committed partner and true friend of Sri Lanka. The High Commissioner (Gopal Baglay) handed over a consignment of 40,000 metric tonnes of fuel by the Indian Oil Company, a statement issued by the Indian High Commission here said.

The fuel delivery by India comes amid the announcement of Sri Lanka’s Finance Minister Basil Rajapaksa’s visit to India in a fortnight to formalize India’s economic relief package for the country facing severe foreign exchange crisis. Last month, India announced a USD 900 million loan to Sri Lanka for its dwindling foreign reserves and food imports, amid a shortage of almost all essential commodities in the country.

Earlier this month, an agreement to extend a USD 500 million line of credit to Sri Lanka for fuel purchases was also sealed which was part of the immediate economic relief package. Sri Lanka’s economy is also facing shortages of food and other essentials, which pushed inflation to a record 25 per cent last month. Tourism, another major foreign exchange earner, has also seen a lull due to the pandemic.

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