- Street lights are switched off, trading hours are shortened
- The government is unable to pay for fuel imports
- Pandemic crisis, tax cuts
COLOMBO, March 31 – Sri Lanka is turning off streetlights to conserve electricity, a minister said on Thursday, as the worst economic crisis in decades led to further power outages and a halt to trading on the main stock exchange.
The island of 22 million has to deal with up to 13 hours of power cuts a day because the government does not have enough foreign exchange for fuel imports. Continue reading
“We have already ordered officials to turn off streetlights across the country to conserve electricity,” Energy Minister Pavithra Wanniarachchi told reporters.
The power outages are adding to the pain of Sri Lankans who are already struggling with shortages of basic necessities and skyrocketing prices.
Retail inflation hit 18.7% in March from the same period a year ago, the statistics department said on Thursday. Food inflation hit 30.2% in March, partly due to currency depreciation and the later lifting of the ban on chemical fertilizers last year.
“This is the worst inflation Sri Lanka has seen in over a decade,” said Dimantha Mathew, research director at First Capital Research.
A diesel shipment under a $500 million credit line from India was expected on Saturday, Wanniarachchi said, although she warned it wouldn’t fix the problem.
“Once that arrives we will be able to reduce the hours of load shedding, but until we get rain, probably sometime in May, the blackouts will have to continue,” the minister said.
“There is nothing else we can do.”
Water levels at reservoirs that feed hydroelectric projects have fallen to record lows, while demand has hit record highs during the hot dry season, she said.
SHARE SHIFTS
The Colombo Stock Exchange (CSE) has cut daily trading to two hours from the usual four and a half hours because of the power outages for the remainder of this week at the request of brokers, the exchange said in a statement.
But shares slid after the market opened Thursday and the CSE halted trading for 30 minutes — the third time in two days — after an index tracking leading companies fell more than 5%.
“Concerns on the macro side, along with news of shorter trading hours and increased power outages, are driving negative sentiment,” said Roshini Gamage, an analyst at brokerage firm Lanka Securities.
The crisis is the result of mistimed tax cuts and the impact of the coronavirus pandemic combined with historically weak public finances, which have caused foreign exchange reserves to fall by 70% over the past two years. Continue reading
Sri Lanka was left with US$2.31 billion in reserves as of February, forcing the government to turn to the International Monetary Fund and other countries, including India and China, for help. Continue reading
Reporting by Uditha Jayasinghe, Writing by Devjyot Ghoshal, Editing by Raju Gopalakrishnan, Robert Birsel, Andrew Cawthorne