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Sri Lanka shut its solely oil refinery Monday after operating out of {dollars} to import crude, in an escalating financial disaster that has triggered shortages of meals and different staples.
The nation’s international reserves had fallen to $2.3 billion on the finish of October, down from $7.5 billion when the present authorities got here to energy nearly two years in the past.
Worldwide ranking businesses have downgraded Sri Lanka’s creditworthiness because the economic system shrank an unprecedented 3.6 p.c final 12 months with the Covid-19 pandemic.
The island’s tourism earnings and international employee remittances have dropped, sparking an import ban on a bunch of products together with autos, spare elements and spices since March final 12 months.
Vitality Minister Udaya Gammanpila stated it was the primary time the Sapugaskanda refinery has been shut down because it was constructed by Iran in 1969.
Gammanpila stated the nation as an alternative deliberate to import refined petrol and diesel and that the federal government would save an unspecified sum of money by doing so.
“Once we refine crude at Sapugaskanda, we get 37 p.c furnace oil and 19 p.c aviation gas and solely 43 p.c petrol and diesel,” he advised reporters in Colombo.
“There is no such thing as a large demand for furnace oil and aviation gas so it’s higher to import refined petrol and diesel that are in excessive demand,” Gammanpila stated.
Prime Sri Lankan officers have warned of gas rationing by the tip of the 12 months until consumption is lower drastically.
Sri Lanka’s oil import invoice was $2.32 billion final 12 months when a barrel of crude had fallen to about $45, however 2021 imports have been anticipated to be about $4.0 billion due to the sharp rise in oil costs within the worldwide market, based on an official report 5 months in the past.
Official sources stated the federal government had been banking on large loans from Oman and India to finance oil imports, however that they had not materialised and negotiations gave the impression to be inconclusive.
The international trade scarcity has already led to the rationing of milk powder, sugar, cooking fuel and cement.
In a bid to earn desperately wanted international money, the central financial institution final week introduced tighter controls on exporters forcing them to covert their international trade earnings inside 180 days at official trade charges.
The Central Financial institution of Sri Lanka has pegged the greenback at 202.99 rupees, however industrial banks have run out of {dollars}. Nevertheless, on the black market, charges have soared to over 240 rupees to the greenback.
The financial institution expects the economic system to increase 4-5 p.c this 12 months with the gradual re-opening of the economic system and the roll-out of a vaccine programme.
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