Electricity prices slated to rise as Govt. under duress from IMF

IMF next tranche, contingent on cost-recovery pricing 

IMF not happy with last price reduction 

IMF financial support disbursed under the arrangement is US$1.7 billion 

CEB in process of calculating rates 

Next revision effective from July 1

By Kelum Bandara 

The government is under compulsion to increase electricity  prices since the International Monetary Fund (IMF) will unlock the next  tranche of US$ $ 344 million, contingent on the restoration of cost  recovery pricing, Daily Mirror learns.   

In the fulfilment of an election promise, the current  government reduced electricity tariffs by 20 per cent in January this  year. However, the IMF conveyed its displeasure over this move since it  is not cost–recovery pricing.   

The IMF and the Sri Lankan authorities reached a staff-level agreement recently on economic policies to conclude the  Fourth Review of Sri Lanka’s reform programme supported by the IMF’s  Extended Fund Facility.  

Once the review is approved by the IMF Executive Board, Sri Lanka will have access to about US$344 million in financing, bringing  the total IMF financial support disbursed under the arrangement to about  US$1.7 billion. 

Nevertheless, 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 proper function of the automatic electricity price adjustment  mechanism; and (ii) the completion of financing assurances review, which  will focus on confirming multilateral partners’ committed financing  contributions and adequate debt restructuring progress, according to  IMF Mission Chief for Sri Lanka Evan Papageorgiou.  

Sri Lanka’s ambitious reform agenda continues to deliver  commendable outcomes. The post-crisis growth rebound of 5 per cent in  2024 is remarkable. Revenue mobilisation reforms had improved the revenue-to-GDP ratio to 13.5 per cent in 2024, from 8.2 per cent in  2022. Gross official reserves reached US$6.5 billion at end-March 2025,  given sizeable foreign exchange purchases by the Central Bank.  Substantial fiscal reforms have strengthened public finances. Sri  Lanka’s debt restructuring is nearly complete, according to him.  

Asked about the government’s move on electricity pricing  under its next revision to be effective from July 1 this year, a  spokesman for the Ceylon Electricity Board (CEB) said that it is in the  process of calculating rates to be submitted to the Public Utilities  Commission of Sri Lanka soon.  

“We calculate the cost involved. It varies according to the  sources we depend on for power generation. At times, we depend  more on hydropower if it rains. Otherwise, it is mostly on thermal power. Also, we depend on solar power for daytime energy  requirements,” he said.   

The current government is proceeding with the IMF programme, although it pledged to rejig it before the elections.