Sri Lanka releases forex for diesel ship: CB governor

ECONOMYNEXT – Sri Lanka has released foreign currency for a diesel ship, Central Bank Governor Nivard Cabraal has announced, as a decision on price increases is still awaited.

“The currencies for the diesel ship have been released,” Cabraal said. “It was done yesterday.

A diesel ship that had arrived in the country over the weekend was waiting for funds to clear its letter of credit to offload fuel.

Sri Lanka now has to pay for fuel in advance before deliveries are made.

There were panic buying in various places and public transport was also disrupted as fuel deliveries were halted by the state-owned Ceylon Petroleum Corporation.

The Sri Lankan economy has recovered and imports are growing faster than inflows, due to the injection of liquidity to keep interest rates low, leading to currency shortages and increased demand for fuel.

From October, the central bank began to give “reserves for imports”, which leads to automatically printing money of an equal amount to prevent the key rate from rising (selling sterilized currencies), leading to more imports and credit.

Over US$900 million of imports for reserve sales have been sterilized (recently cleared with printed money) since then.

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Amid rising world prices, the CPC is also posting losses, demanding higher interest rates to raise more savings and slow other credit. Otherwise, more money will be printed to keep rates low.

Cabraal also called for a price increase to match rising import costs to prevent the Ceylon Petroleum Corporation from taking on more debt with commercial banks and avoid further problems later.

Sri Lanka has the lowest fuel prices in South Asia, he said in a post on twitter.com.

Analysts say that while raising fuel prices may seem like a politically difficult choice, the potential consequences of not doing so could be greater.

The tanker contains 37,500 metric tons of diesel, but fuel consumption in the country has risen sharply due to drought and the need to conserve hydroelectric power.

However, with heavy demand for diesel, the shipment would not last long.

Daily diesel usage, which was around 6,000 metric tons of diesel, has increased to 9,000 metric tons due to additional thermal fuel generation and the replacement of fuel oil with diesel, the ministry secretary said. of Energy, KD Olga, on local television.

A 270 megawatt coastal power plant needs around 1,000 tonnes of diesel per day. The plant previously operated on low sulfur fuel oil.

Sri Lanka imposed 4.5 hours of power cuts due to fuel shortages on February 23. (Colombo/Feb23/2022)

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