Sri Lanka prepares for potential economic downturn amid ongoing global tensions

Sri Lanka Imposes Fuel Rationing Amid Global Oil Shortages

In Kandy, Sri Lanka, a city in central Sri Lanka, residents are waiting in line to purchase their allocated fuel ration. The government has implemented a QR-based system to manage fuel distribution, which was also used during the 2022 economic crisis. The current shortage is attributed to the war on Iran, which has disrupted global oil supplies.

Sri Lanka imports 60% of its energy needs through the Strait of Hormuz, a critical passageway for international oil and gas trade. With the strait largely closed, the country’s fuel supply is severely impacted. The government has allocated specific amounts of fuel to various vehicles, including motorbikes (8 litres), tuk-tuks (20 litres), cars (25 litres), buses (100 litres of diesel), and lorries (200 litres of diesel).

The price of fuel in Sri Lanka has increased by approximately 33% since the start of the war on Iran. This increase is largely due to global market fluctuations, rather than domestic policies. The government’s decision to raise prices is intended to mitigate losses, which are estimated at $63 million per month.

Experts predict that the fuel crisis will have significant knock-on effects for Sri Lanka’s economy, particularly in terms of food prices. According to researchers, a 15% overall increase in food prices can be expected. This echoes concerns from previous economic crises, including one in 2022 that led to widespread shortages and price hikes.

The current government, which took office in 2024, faces significant challenges in addressing the fuel shortage. While some officials have promised to lower bus fares if fuel costs drop, many Sri Lankans remain concerned about the impact on their livelihoods.

Source: Al Jazeera