Courtesy The Daily Mirror

Colombo, May 3 (Daily Mirror) – The government is facing a dilemma as it must either increase the power tariff or face a delay in receiving the fifth tranche under the Extended Fund Facility (EFF) agreement signed with the IMF, United National Party (UNP) National Organiser Sagala Ratnayake said yesterday.

He said Sri Lanka breached the EFF agreement it signed with the IMF by reducing the power tariff in February this year, creating a problematic situation.

Mr. Ratnayake told a media briefing that Sri Lanka has reached a staff-level agreement on the fourth review under the EFF agreement, but approval from the IMF’s Executive Board is still pending. The staff-level agreement is subject to IMF Executive Board approval, contingent on (i) the implementation of prior actions relating to restoring electricity cost-recovery pricing and ensuring the proper function of the automatic electricity price adjustment mechanism, and (ii) the completion of the financing assurances review,” Mr. Ratnayake said, quoting the release issued by the IMF.

The economic reforms programme during the tenure of former President Ranil Wickremesinghe was based on two key factors. One was the set of conditions Sri Lanka agreed to under the EFF agreement, and the other was the set of reforms undertaken independently by the Sri Lankan government. Sri Lanka agreed to implement a power tariff mechanism, under which a cost-reflective power tariff review must be undertaken every six months,” he added. However, the Sri Lankan government reduced the power tariff in February this year, resulting in the Ceylon Electricity Board (CEB) incurring a loss of Rs. 11.3 billion.

The government will have to increase the power tariff to obtain the fifth tranche under the EFF agreement, as per the IMF release. Industries will be affected if the government increases power tariffs to recover costs,” he said. Mr. Ratnayake added that the Sri Lankan government should issue a clear statement on this situation.