The International Monetary Fund (IMF) has expressed concerns over Sri Lanka’s recent decision to reduce electricity tariffs by 20%, effective January 17, 2025.
Peter Breuer, the IMF’s Senior Mission Chief for Sri Lanka, noted that this reduction moves away from cost-reflective pricing, potentially leading to financial losses for the Ceylon Electricity Board (CEB).
He noted that such losses could accumulate as debt, becoming a contingent liability for the government—a scenario Sri Lanka has faced before.
Breuer emphasized the importance of aligning electricity tariffs with the actual costs of generation and distribution.
He stated that restoring cost-recovery pricing is a key objective for the next program review.
Breuer also 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.
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