(Corrects typo in title)

By Uditha Jayasinghe

COLOMBO (Reuters). Several areas in Sri Lanka suffered prolonged power cut Wednesday due to a deeper economic crisis that roiled markets. The government was unable, according to an official, to pay for fuel shipments as a result of a lack of foreign exchange.

After suffering from its worst economic crisis for decades, 22 million people in the country are now seeking help from the International Monetary Funds. This is due to badly timed tax cuts as well as the COVID-19 pandemic’s impact and historically poor government finances.

Sri Lankan shares plunged more than 7 percent, which caused the Colombo Stock Exchange (CSE) to stop trading two times.

Sri Lanka’s foreign exchange reserves fell by 70% over the last two years to $2.31 trillion as of February. This leaves Sri Lanka unable to import fuel and food.

Janaka Ratnayake (Chairman of the Public Utilities Commission of Sri Lanka) stated that prolonged power cuts are partly due to Sri Lankan’s inability pay $52 million for an 37,000-tonne, diesel ship. This shipment is currently awaiting offloading.

Ratnayake stated to Reuters that there is no currency for them. That is reality.

He said that power cuts may increase in the coming days.

The ongoing dry season has caused low water levels in hydropower stations to affect electricity generation, according to Sri Lanka’s power ministry.

According to the ministry, some hydro-power reservoir water is being retained for irrigation purposes before the new cropping season and domestic uses.

According to sources familiar with ongoing negotiations, Basil Rajapaksa, Finance Minister of Sri Lanka, will visit Washington, April, in order to find a way out.

A Friday IMF assessment revealed that Sri Lanka is experiencing both a sovereign and a balance of payments crisis. Sri Lanka would require a comprehensive strategy to ensure its debt sustainability.

Sri Lanka would receive its 17th financial rescue package if the IMF approves it.

FEWER PEOPLE, FEWER BEERS

Harpo Gooneratne is a Colombo-based restaurateur who said that the lack of diesel made it hard to run his 10 restaurants in times of power outages, even though some have their generators.

Gooneratne said, “It’s insane.” He employs 150 workers at his businesses. This is a unique situation, and we are not sure how it will last.

Dhananath Fernando from Colombo’s Advocata Institute, a think tank analyst, stated that the deteriorating electricity environment will impact already troubled businesses, particularly exporters who have secured orders and are limited in their ability to absorb price increases.

Fernando explained that “this will further harm Sri Lanka’s growth” and would threaten foreign earnings which are critical to boost reserves, pay off debts and cover imports essentials.

Government data from Tuesday showed that Sri Lanka’s fourth quarter growth rate was 1.8%, which is slower than anticipated. It now stands at 3.7% for the full-year.

Gooneratne reported that his Colombo restaurant clientele had shrunk to around 30%.

He said, “Even though people are going out to spend money,” “Now, the person who had previously had only one beer will have just one.”