Sri Lanka’s fuel crisis will take time to resolve: PM

Sri Lanka's fuel shortages will take some time to resolve as the country is finding it difficult to secure its requirement of $550mn/month for fuel, prime minister Ranil Wickremesinghe said.

"The first step is to arrive at an agreement with IMF to obtain an additional credit facility," Wickremesinghe said on 22 June. "The main IMF team is in Sri Lanka and discussions are ongoing."

Energy minister Kanchana Wijesekera said recently that it would be difficult to work with any oil-producing country unless Sri Lanka has at least about $3bn , which has to come from the IMF bailout programme, development agencies and investments.

Sri Lanka depends heavily on fuel imports. It consumes around 110,000 b/d of oil products, but its sole 50,000 b/d Kelaniya refinery produces only around 35,000 b/d. The country is facing its worst foreign exchange crisis since gaining independence in 1948, sparking protests, shortages of food and fuel, as well as power cuts that lasted more than 10 hours back in March.

But the government has been able to reduce the span of power cuts, Wickremesinghe said. Wijesekera said on 22 June that the government plans to maintain a 2½-hour power cut until Sri Lanka's only coal-fired power plant, the 2.25mn t/yr Lakvijaya, is connected back to the grid.

He added that Sri Lanka paid $34mn for a heavy fuel oil cargo that unloaded on 22 June and would be used for power generation and industries, without specifying the volume. Sri Lanka received 298,000 bl of diesel from India on 16 June, the last consignment under its current credit line with India.

"We will also be able to eliminate the gas shortage once we receive the 7mn LPG cylinders stocks for which a World Bank loan of $70mn and $20mn of our own reserves have been allocated," Wickremesinghe said. Sri Lanka imports most of its LPG, with about three-quarters of its around 500,000 t/yr of demand coming from homes for cooking and the rest from the industrial and commercial sectors.

The prime minister previously said that it costs $40mn/month to import gas and that multilateral assistance, local currency and Indian loans are currently being used for imports, adding that the country would need $250mn over the next six months for gas. "Somehow, we [also] have to find $3.3bn worth of fuel for the next six months," he said on 7 June.

The government is hoping to get financial aid from its Asian neighbours. "We are organising a credit aid conference led by India, Japan and China. We would be looking at resolving past conflicts and disagreements and fostering friendly relations once again," Wickremesinghe said on 22 June. "We hope to arrive at a general consensus on the lending processes."

By Reena Nathan

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