COLOMBO, March 30 – Sri Lankans faced 10-hour power outages on Wednesday and warnings of longer blackouts on Thursday as a deepening economic crisis roiled markets and the electricity regulator urged more than a million government employees to shut down Working from home to save fuel.
The island nation has been unable to pay for fuel deliveries due to a shortage of foreign exchange and is ready to turn to the International Monetary Fund (IMF) for assistance.
“We have asked the government to allow the public sector, which employs about 1.3 million people, to work from home for the next two days so that we can better deal with the fuel and electricity shortages,” said Janaka Ratnayake, Chairman of the Public Utilities Commission of Sri Lanka, Reuters said.
The power outages would be extended to 13 hours on Thursday, Sri Lanka’s electricity regulator said in a statement.
Amid the country’s worst economic crisis in decades, foreign exchange reserves have fallen 70% over the past two years, to a meager $2.31 billion in February.
Wednesday’s protracted power outages were caused in part by the government’s inability to pay $52 million for a 37,000-ton shipment of diesel that was waiting to be unloaded, Ratnayake said.
“We don’t have any foreign currency to pay,” he said, warning of further power outages over the next two days. “That’s the reality.”
‘CAN’T SEE THE END OF THE TUNNEL’
Sri Lankan shares ended 3.6% lower on Wednesday after falling more than 7% on the day, prompting the Colombo Stock Exchange to halt trading twice.
Udeeshan Jonas, chief strategist at equity research firm CAL Research, said the market is reacting to a deepening of a crisis sparked by mistimed tax cuts, the coronavirus pandemic and historically weak government finances. Continue reading
“Investors can’t see the end of the tunnel,” he said.
In order to find a way out of the crisis, Finance Minister Basil Rajapaksa will travel to Washington in April for talks with the IMF. The fund’s assessment, released on Friday, says Sri Lanka is experiencing a combination balance of payments and sovereign debt crisis and needs a “comprehensive strategy” to make its debt sustainable.
If Sri Lanka secures an IMF program, it would be its 17th bailout from the global lender.
Harpo Gooneratne, a restaurateur in Sri Lanka’s capital Colombo, said that although some of his 10 restaurants had their own generators, the lack of diesel made it difficult to run his business during power outages.
“It’s crazy,” he said.
The deepening blackouts will hit already-struggling businesses, particularly exporters, who have received orders and have limited ability to absorb cost increases, said Dhananath Fernando, an analyst at Colombo-based think tank Advocata Institute.
“This will further hurt Sri Lanka’s growth and threaten foreign exchange earnings, which are crucial to boost reserves, repay debt and pay for key imports,” Fernando said.
Gooneratne said his restaurants had 30% fewer customers and were spending less.
“Even when people go out, they are cautious about their spending,” he said. “Anyone who used to drink two beers now only gets one.”
Writing by Devjyot Ghoshal; Edited by Simon Cameron-Moore, Tomasz Janowski and Alex Richardson