Sri Lanka's Electricity Tariffs Must Reflect True Costs: IMF

COLOMBO (News 1st); The International Monetary Fund has raised concerns regarding the recent reduction in electricity tariffs, which took effect in January.

Peter Breuer, the Senior Mission Chief for Sri Lanka pointed out that this reduction means that the cost-reflective pricing is no longer being met, potentially leading to financial losses for the Ceylon Electricity Board (CEB).

Breuer explained, "The tariff cut implies that CEB wouldn't be able to avoid losses on a forward-looking basis. These profits and losses depend on various factors, including weather conditions. However, the concern is that debt could start building up again in the electricity company, becoming a contingent liability for the government. This is something Sri Lanka has experienced before."

He emphasized the importance of ensuring that consumers pay for the actual cost of generating and distributing electricity as part of the programme's goals. Breuer also mentioned that restoring cost-reflective energy pricing is a key objective for the next review.

Peter Breuer noted that mechanisms are in place to address this issue, such as the bulk supply transaction account, which is designed to trigger an automatic tariff increase when CEB's losses become too large.

He stressed the importance of allowing these mechanisms to function properly and ensuring that future tariffs are set to cover costs.