South Asia - Fuel subsidy to continue in Sri Lanka

Published: Monday 31 December 2007

To avoid burdening consumers, the Sri Lankan government has turned down a request by the International Monetary Fund (IMF) urging the government to suspend its fuel subsidy. IMF suggested that the government raise fuel prices to avoid a backlash on the economy. Sri Lanka's government-owned Ceylon Petroleum Corporation currently incurs losses to the tune of Rs (Lankan) 2 billion (US $18 million) a year. The minister of petroleum, A H M Fowzie, said that the government has signed an agreement with the Iranian government to double the capacity of its Sapugaskanda refinery to 100,000 barrels per day. IMF also said that the Ceylon Electricity Board is likely to incur huge losses due to the lack of adjustment in electricity tariffs that have fallen below cost recovery levels.

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