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Crisis-hit Sri Lanka hikes fuel prices to record high

COLOMBO (AFP) – Cash-strapped Sri Lanka sharply hiked fuel prices to a record high yesterday, causing further pain to the country’s 22 million people in its worst crisis since independence.

The South Asian island nation has suffered months of dire shortages and anti-government protests, which turned deadly earlier in May with at least nine people killed.

Energy Minister Kanchana Wijesekera said a newly appointed “economic war Cabinet” on Monday approved the new rates to stem huge losses at the state-run Ceylon Petroleum Corp.

The price of diesel, commonly used in public transport, was raised from LKR289 (USD0.80) to LKR400 a litre, a 38-per cent jump, while the cost of a litre of petrol was increased from LKR338 to LKR420.

Diesel prices have increased 230 per cent and petrol has gone up 137 per cent in the past six months.

Both are in short supply and motorists have to queue, sometimes for days, to fill up. An acute foreign exchange shortage has also led to widespread scarcity of food and medicines, with the public suffering lengthy electricity blackouts and high inflation.

Bus and taxi fares have risen by up to 50 per cent sparking price increases in almost all goods and services, officials said. Wijesekera said the government was seeking a USD500 million loan from India to purchase fuel, in addition to two credit lines worth USD700 million already provided by New Delhi.

The census office reported on Monday that the country’s overall inflation last month was a staggering 33.8 per cent year on year, with food inflation at an even higher 45.1 per cent.

However, economist at Johns Hopkins University Steve Hanke, who tracks prices in the world’s trouble spots, said Sri Lanka’s inflation was even higher than officially reported.

“Using high-frequency data and the purchasing power parity technique, I accurately measure inflation at 122 per cent year on year,” Hanke said, referring to March inflation, which was officially 21.5 per cent. “Inflation is crushing the poorest in Sri Lanka,” he added. Sri Lanka last month announced a sovereign default on its USD51 billion foreign debt and is in talks with the International Monetary Fund (IMF) to secure a bailout.

Cabinet spokesman Bandula Gunawardana said the government decided on Monday to appoint consultants to help Colombo negotiate debt restructuring as a prelude to an IMF programme.