A soldier stands guard as people stand in a queue to buy diesel at a fuel station in Colombo. AFP
Power and Energy Minister Kanchana Wijesekera said in a message on Twitter that petrol prices would increase by 20%-24% while diesel prices would rise by 35%-38% with immediate effect.
"Cabinet also approved the revision of transportation and other service charges accordingly," he said.
Wijesekera said also that people would be encouraged to work from home "to minimise the use of fuel and to manage the energy crisis" and that public sector officials would work from office only when instructed by the head of the institution.
A woman waits in a queue to buy kerosene for home use at a service station in Colombo. AFP
Food and transport price increases will flow through to food and other goods, economists said.
Annual inflation in the island nation rose to a record 33.8% in April compared to 21.5% in March, according to government data released on Monday.
Sri Lanka is in the throes of its worst economic crisis since independence, as a dire shortage of foreign exchange has stalled imports and left the country short of fuel, medicines and hit by rolling power cuts.
The financial trouble has come from the confluence of the COVID-19 pandemic battering the tourism-reliant economy, rising oil prices and populist tax cuts by the government of President Gotabaya Rajapaksa and his brother, Mahinda, who resigned as prime minister this month.
Economists have said fuel and power price hikes will be necessary to plug a massive gap in government revenues, but agree that it will lead to short-term pain.
Sri Lanka President Gotabaya Rajapaksa speaks during an event. File photo
Dhananath Fernando, an analyst for Colombo based think tank Advocata Institute, said prices of petrol have soared 259% since October last year and diesel by 231%. Prices of food and other essential goods have surged, he said.
"Poor people will be the most effected by this. The solution is to establish a cash transfer system to support the poor and increase efficiency as much as possible."
Prime Minister Ranil Wickremesinghe, appointed in place of Mahinda Rajapaksa earlier this month after violence broke out between government protesters and protesters, said last week: "In the short term we will have to face an even more difficult time period. There is a possibility that inflation will increase further."
The state electricity monopoly said it was imposing the 10-hour power cut, up from a seven-hour outage since the start of the month, because there was no oil to power thermal generators.
Sri Lanka’s economy shrank 8.4 per cent in the quarter through June from a year ago in one of the steepest declines seen in a three-month period, amid fertiliser and fuel shortages
India’s finance ministry is considering cutting excise duties on petrol and diesel to cushion the impact of record high domestic prices, three government officials close to the discussions said.
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