Sri Lanka needs to organize power outages to save cash

Sri Lanka needs to impose temporary power cuts because the island faces shortages of fuel which disrupts its power grid.

Sri Lanka train

Sri Lanka organizes power outages as it lacks foreign reserves to pay for fuel and reimburse its debt.

Sri Lanka’s Public Utilities Commission said it will shut off the country’s grid for four and a half hours on Wednesday after two hours of power cut on Tuesday and Monday. Electricity will be switched off on a rotating basis between regions between 8:30 a.m. and 10:30 p.m., according to officials.

The regulatory body said the state-owned Ceylon Electricity Board had requested permission for the cuts.

The reason is that fuel shortages caused the loss of about 700 MW to the national grid. Over the last few weeks, Sri Lankans had experienced several sporadic power failures.

Commission’s chairman Janaka Ratnayake said the current situation is a fuel crisis and not an electricity crisis. And with a lack of rainfalls, hydroelectric dams haven’t been able to relieve shortages in a country that pledged not to build any new coal-fired power plants to become carbon neutral by 2050.

Sri Lanka is suffering from its worst economic crisis in decades. It lacks cash and foreign reserves to import fuel. Moreover, devaluation of the Sri Lanka rupee has increased import prices, including those of fuel and other essential products like cooking gas, petrol but also milk powder.

Sri Lanka rupee’s value lost 6% since April last year. Inflation surged to 12.1% in December.

The lack of fuel also impacted transportation as many Sri Lankans have been looking for fuel for their motorbikes and vehicles in the past few days.

Sri Lanka’s economy depends a lot on tourism and trade, which the COVID-19 pandemic severely hit. The economy is estimated to have contracted by 1.5% in July-September 2021, according to the central bank.

In the meantime, Sri Lanka needs to honor repayments on $12.5 billion in international sovereign bonds and tries to gradually build back foreign reserves.

Sri Lanka has foreign debt obligations exceeding $7 billion in 2022 whereas the gross official reserves stood at $2.36 billion at the end of January, according to the country’s central bank.

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