Starting Tuesday, Sri Lanka will reduce electricity prices by 22.5 percent, according to the utilities regulator, as the country seeks to alleviate the living costs for millions amidst its most severe financial crisis in decades.
Following a 7.8 percent economic contraction in 2022, Sri Lanka increased electricity rates by 75 percent in September and by another 66 percent in February to comply with the terms of a $2.9 billion bailout from the International Monetary Fund (IMF). The regulator also announced a 33 percent reduction in power tariffs for industries, with lower-income users seeing a decrease of approximately Rs2,000 ($7) on their bills.
Manjula Fernando, chairman of the Public Utilities Commission of Sri Lanka (PUCSL), stated on Monday that this reduction is anticipated to aid in economic recovery and provide relief to the public. Analysts believe the reduction will enable Sri Lanka to maintain its central bank's inflation target of five percent, in an economy projected to grow by 3 percent this year after a two-year hiatus.
The combination of increased taxes, a weaker rupee, and rising fuel costs had driven inflation to a record 70 percent in September 2022. However, it dropped to 1.7 percent in June, partly due to a 21.9 percent price cut in March. Sri Lanka's four-year Extended Fund Facility with the IMF, finalized in March of the previous year, mandates the country to increase taxes, eliminate subsidies affecting the power sector, and reduce public sector debt.
