Sri Lanka Must Act Now on Electricity Cost Recovery : IMF

COLOMBO (News 1st); The International Monetary Fund (IMF) has emphasized the urgent need for the Sri Lankan government to implement critical reforms related to electricity cost-recovery pricing and the automatic electricity price adjustment mechanism.

Evan Papageorgiou, the IMF Mission Chief for Sri Lanka, acknowledged the shared commitment between the IMF and the Sri Lankan government to address the longstanding issues of electricity dependability and high costs.

In reponse to a question posed by News 1st's Zulfick Farzan during a virtual press conference on Tuesday (29) he stated, "There is strong commitment in seeing these reforms take place because, as you know very well, electricity, and the dependability of electricity and the high price of electricity, have been an issue for a very long time in Sri Lanka."

During the review mission discussions held in Colombo in April and in Washington last week, the IMF assessed that the continuous structural benchmark on electricity cost recovery pricing remains unmet.

Papageorgiou explained that the current tariff does not adequately cover the costs of the Ceylon Electricity Board (CEB), including generation, transmission, and distribution. Additionally, the automatic tariff adjustment mechanism, based on bulk-supply consumption, has not functioned as intended.

The IMF has proposed the introduction of prior actions to restore electricity cost recovery pricing and ensure the proper functioning of the automatic electricity price adjustment mechanism.

Papageorgiou stressed the importance of implementing these actions promptly to prevent financial losses for the CEB and avoid the accumulation of debt, which could become a contingent liability for the government and a burden on taxpayers.

He also noted that these reforms are a core pillar of the program, stating, "Once it is resolved and properly held, it will help fiscal system ability and make electricity price generation more dependable. Down the road, this will allow for more investment and necessary steps to see electricity prices coming down."