Sri Lanka has reduced petrol and diesel prices for the first time since the recent conflict in the Middle East drove up global energy costs, offering some relief to consumers in the import-dependent island nation.
The state-owned petroleum supplier announced on Tuesday that the price of diesel would fall by 25 Sri Lankan rupees per litre to 382 rupees (around 1.15 US dollars). Petrol prices were also cut by 20 rupees per litre, bringing the new retail price to 414 rupees.
The latest reduction comes after international oil prices declined in response to an agreement between the United States and Iran to begin talks aimed at easing tensions and ending their conflict.
Earlier this year, Sri Lanka increased the prices of both petrol and diesel by nearly 50% after military action involving the United States and Israel against Iran led to a sharp rise in global energy prices. Electricity tariffs were also raised by around one-third as the government sought to recover the higher cost of imported fuel.
Sri Lanka remains highly exposed to fluctuations in global energy markets because it imports all of its crude oil and relies heavily on imported coal to generate electricity. Officials have repeatedly warned that any prolonged instability in the Middle East could place additional pressure on the country’s economic recovery.
The government has also informed the International Monetary Fund (IMF) that sustained high energy prices could complicate efforts to rebuild the economy following the country’s worst financial crisis in decades.
Under the IMF-supported reform programme, Sri Lanka is required to keep fuel and electricity prices aligned with actual costs while limiting subsidies that could increase pressure on public finances.
The country defaulted on its 46 billion US dollar foreign debt in 2022 after its foreign currency reserves were exhausted, leaving it unable to meet external payment obligations. Since securing a 2.9 billion US dollar IMF bailout in March 2023, Colombo has been implementing a series of economic reforms aimed at restoring financial stability and rebuilding investor confidence.
The latest reduction in fuel prices reflects the government’s effort to pass on lower international energy costs while continuing to meet the pricing commitments agreed under the IMF-backed recovery programme.
