The latest electricity price rise in crisis-hit Sri Lanka has left stall owner Mohammed Lafeel in a quandary: the 66% increase means he can’t afford to pay for electricity but can’t manage without it so goes deeper into debt to keep it on.
Over the last month, with inflation hovering at 55% year-on-year, Lafeel says his income has fallen by about a third as fewer customers buy his knick-knacks as more of them struggle under the island’s worst financial crisis in seven decades.
Lafeel says he doesn’t know how he can repay the 300,000 rupees ($835) he borrowed for his daughter’s wedding and has had to borrow more to reconnect the power at home after it was cut off because he hadn’t paid the bill.
“Everyone is under pressure,” Lafeel told Reuters at his stall next to the main railway station in the city of Colombo, days after the second power price increase since a 75% rise in August.
“But how can we manage without power?”
The power price increase is the latest measure by Sri Lanka to clinch a $2.9 billion loan from the International Monetary Fund (IMF) to tackle a crisis that evolved from the confluence of the COVID-19 pandemic battering its tourism-reliant economy, rising oil prices and populist tax cuts by a previous government.
President Ranil Wickeremesinghe took office last July promising to pull the country out of crisis after protests against the economic mess led to the downfall of his predecessor.
On Tuesday, the cabinet said talks with the IMF were in the final stage. The government hoped to reach a deal by March and gradually reduce record-high interest rates in line with inflation, the president’s office said.
Like most of Sri Lanka’s 22 million people, Sanjula Peiris, managing director of family-owned Wish Bakers, desperately needs a break from food inflation, running at a stubbornly high 60% year-on-year.
The company, which has 15 outlets in the outskirts of Colombo, decided not to increase prices for fear of losing business. Their costs, however, have tripled in the past year, with the latest electricity bill increase adding to the burden.
“It’s not just the ovens, most of our machines need power,” Peiris said. “We’re struggling to maintain our business.”
About 200 of Sri Lanka’s 5,000 bakeries have shut down, said N.K. Jayawardena, president of the largest bakeries union, the All Ceylon Bakeries Association.
Many of those still running have laid off staff, he said.
“This power tariff increase is very unfair, especially when it comes on top of so much hardship,” he said.
The government has acknowledged the pain of the higher electricity bills but said it had no other way out of the crisis.
Carpenter Mohamed Sathurudeen said that was cold comfort.
“We can’t afford a hike in electricity prices, we’re already suffering great economic difficulty,” he said.
“If the government can’t find a solution to this, then it has failed. Please give this to someone who can manage it properly.”