Sri Lanka to cut power prices by 22.5%

Sri Lanka will cut power prices by 22.5 per cent from today (Tuesday), the utilities regulator said, as the Indian Ocean nation attempts to ease the cost of living for millions of people amid its worst financial crisis in decades.

After the crisis shrank its economy 7.8 per cent in 2022, Sri Lanka boosted power prices by 75 per cent that September, and by another 66 per cent the following February, to meet the terms of a $2.9 billion bailout from the International Monetary Fund (IMF). Industries would also see a cut of about 33 per cent in power tariffs, the regulator added, with poorer users getting a reduction of about Rs2,000 ($7) in their bills.

“We expect this reduction to assist in the rejuvenation of the economy and help the public get relief,” Manjula Fernando, chairman of the Public Utilities Commission of Sri Lanka (PUCSL), told reporters on Monday.

The cut will help Sri Lanka stick to an inflation target of 5 per cent set by its central bank, analysts said, in an economy expected to grow by 3 per cent this year after a gap of two years.

Together with higher taxes, a weaker rupee and fuel cost increases, the power price hikes had pushed inflation in the nation of 22 million to a record high of 70 per cent in September 2022.

But it declined to 1.7 per cent in June, helped by a price cut of 21.9 per cent in March this year.

Sri Lanka’s four-year Extended Fund Facility with the IMF, finalised in March last year, requires the country to raise taxes, remove subsidies that have hit the power sector, and cut public sector debt.