Sri Lanka raises fuel prices amid a surge in global commodity costs

The South Asian country is grappling with high inflation and food shortages

People queue to buy diesel at a fuel station in the Sri Colombo. AFP

Sri Lanka raised fuel prices by more than 40 per cent after a currency float pushed the local rupee to record lows and amid a surge in global commodity costs.

The Ceylon Petroleum Corp increased the price of a litre of petrol to 254 rupees ($1) from 177 rupees, and diesel to 176 rupees a litre from 121 rupees. The changes are effective Saturday.

Sri Lanka was already grappling with Asia’s highest rate of inflation before Russia’s war added to its woes. The country has been facing shortages of food and fuel amid a dollar squeeze, with queues seen outside petrol stations and power cuts of as long as seven hours in certain parts of the island.

Separately, the Central Bank of Sri Lanka in a notice late on Friday said foreign earnings from exported goods and services supplied overseas had to be remitted within 180 days. Authorities have taken a series of steps including a currency devaluation, import restrictions and raising policy rates, seen as creating conditions to opt for a bailout by the International Monetary Fund.

The nation has about $2 billion of foreign currency reserves against total debt repayment of as much as $7 billion for 2022. This includes a $1 billion dollar bond maturing in July.

Yields at Sri Lanka’s weekly 91-day Treasury-bill auctions rose by nearly 100 basis points on March 9, signalling that the monetary authority may raise borrowing costs further.