Sri Lanka hikes power prices by 66% hoping to ensure IMF bailout

Colombo: Amid a full-blown economic crisis, Sri Lanka on Thursday raised electricity prices by 66%, in a move that the government hopes will persuade the International Monetary Fund (IMF) to provide a much-needed bailout for its crisis-ridden economy. The increase, announced by Power and Energy Minister Kanchana Wijesekera, comes after the government raised electricity prices by 75 per cent last year, and adds to the trouble of Sri Lankans already struggling with inflation above 54 per cent year-on-year in January and income taxes as high as 36 per cent. “We know that this will be hard on the people, especially the poor, but Sri Lanka is caught in a financial crisis and we have no choice but to move towards cost reflective pricing,” Wijesekera said. “We hope that with this step Sri Lanka has moved closer to getting the IMF programme,” he added. An official at the Ceylon Electricity Board confirmed the scale of the price increase. The IMF has agreed to lend Sri Lanka $2.9 billion in September to overcome its worst financial crisis in seven decades, but the bailout comes with conditions that include raising taxes, removing subsidies and cutting public sector debt. President Ranil Wickremesinghe’s government, that took over after mass protests against economic mismanagement ousted his predecessor last year, desperately needs the IMF funds and has been courting multilateral agencies for support since taking office in July. The Power and Energy Minister said the price hike would help the power ministry offset the gap caused by the cessation of government subsidies from January, and also help manage long-term fuel contracts. The Sri Lankan government hopes to reduce tariffs by July, when it plans to revise prices again, he said. Analysts, however, predicted that the power price hike would further increase inflation. “We are projecting inflation to increase slightly to 55.5 per cent next month but overall inflation will continue downward given the high base effect from last year,” said Dimantha Mathew, head of research, First Capital Holdings. In Sri Lanka, inflation hit a record 73.7 per cent in September last year. Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook , Twitter and Instagram .