COLOMBO: A financial crisis in Sri Lanka that has led to fuel shortages on Wednesday showed signs of worsening as authorities imposed hours-long power cuts throughout the island nation.
Since last year, the country has been struggling to deal with foreign exchange problems that have hampered purchases of diesel for power plants. The crisis saw reserves dropping to $2.36 billion at the end of January, with fuel shortages triggering long queues at petrol stations and intermittent, often unannounced power outages in recent months.
Janaka Ratnayake, chairman of Sri Lanka’s Public Utilities Commission, told Arab News: “We have come to a point where we do not know what will happen tomorrow.”
The electricity regulator said scheduled power cuts would be imposed for close to five hours on parts of the island. “But this is a forex (foreign exchange) crisis, not an electricity crisis,” Ratnayake added.
As foreign exchange runs short, Sri Lanka also faces shortages of essential goods and a quickening inflation.
The government is now struggling to pay for diesel imports despite three ships arriving at the port of Colombo since Sunday. Sri Lanka’s Energy Minister Udaya Gammanpila said the country only had enough funds to pay $35 million.
A shipment of 37,000 tons of diesel was released on Wednesday, but that was only expected to last for around a week.
The country of 22 million people requires around 4,000 tons of diesel every day to run several thermal power plants.
Officials have flip-flopped on decisions related to power cuts, including reassurances earlier this year that there would be none until April. This time, Ratnayake said the power cuts may continue indefinitely.
Katya Perera, who works from her home in Colombo for a finance company, told Arab News: “They say it will only be a two-hour or one-hour cut, but the power cuts last for much longer than that.”
Indrajith Colonne, a cab driver in the capital, said Sri Lankans were growing distrustful of the government. “What they say today, they change tomorrow,” Colonne told Arab News. “So even if they say there is no need to worry about fuel, we go and stand in the queue and get what we can because we don’t trust them.”
Deshal de Mel, an economist and research director at Colombo-based think tank Verite Research, said: “Sri Lanka’s most pragmatic option would be to enter into negotiations with its foreign creditors to restructure its external debt.”
An agreement with the International Monetary Fund, he added, would play an important role while the country navigated the “painful and challenging restructuring process.”
After months of refusing to consider the IMF, a Cabinet spokesman on Tuesday said the South Asian country was open to discussions with the international financial institution and other multilateral lenders, such as the Asian Development Bank, on seeking assistance.