Sri Lanka energy crisis as country struggles to secure fresh fuel supplies, minister says

The island withers under it worst financial crisis seven decades with foreign exchange reserves at an all-time low, leaving it struggling to pay for essential imports, including fuel, food and medicine.

“We are struggling to find suppliers. They don’t want to accept letters of credit from our banks. More than $700 million in payments are overdue, so suppliers are now demanding upfront payments,” Energy and Power Minister Kanchana Wijesekera told reporters.

Over the past two months, Sri Lanka has received most of its fuel through a $500 million Indian credit line that expired in mid-June. According to Wijesecker, the batch of gasoline, which was supposed to take place last Thursday, has not arrived, and no new deliveries are yet planned.

“We have about 9,000 metric tons of diesel and 6,000 metric tons of gasoline left. We are doing our best to get new supplies, but we don’t know when that will be.”

However, Sri Lanka also introduced a 12-22% increase in fuel prices during the early hours of Sunday. Rising prices in May pushed inflation to 45.3%, the highest level since 2015.

People already queuing for miles at gas stations are unlikely to receive fuel, Vieseker said, as the government focuses on issuing remaining supplies for public transport, power generation and medical services.

The military, already deployed at gas stations to quell the riots, will now distribute tokens to those who wait, sometimes for days, he said, adding that fuel rations will be distributed at ports and airports.

Separately, the government on Sunday asked about a million civil servants to work from home until further notice.

A delegation from the US Treasury and State Departments arrived in Colombo on Sunday for a three-day visit to assess the situation. An International Monetary Fund team is already in Sri Lanka to negotiate a possible $3 billion aid package.