ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation hit by price controls and forex shortages from call money rate targeting has racked up debt of 707.5 billion rupees by July 2021, official data showed.
CPC had imported 18.4 million barrels of crude and refined products up to July at a cost of 253.6 billion rupees, a Finance Ministry report said.
Cost of sales had risen 17 percent to 315.8 billion rupees up July 2021 up from 268 .22 billion rupees last year.
Despite a price increase in June 2021, CPC had made an operating loss of 18.8 billion rupees, compared to profits of 17.4 billion rupees in 2020, when a Coronavirus pandemic slashed oil prices.
Finance costs were 13.7 billion rupees up from 11.5 billion rupees.
Total losses were 61.8 billion rupees along with a depreciation of the rupee from 182.73 to the US dollar to 199.49 rupees.
Sri Lanka’s rupee collapses with forex shortages whenever the central bank prints money to target a call money rate even when budget deficits are brought down such as in 2018.
The CPC is then barred from buying dollars due to the forex shortages from liquidity injected to target a cal money rate and forced to borrow dollars or get credit lines, pushing up its unhedged dollar exposure and the total public sector debt.
Each time the rupee falls, it then creates losses for the utility. The CPC has about 1.8 billion US dollars of Treasury guaranteed dollar debt and more suppliers’ credit.
The CPC owned 707.5 billion rupees to state banks or about 4.2 percent of projected gross domestic product for 2021.
By June 2021, based on actual GDP up to then, Sri Lanka had central government debt of 105 percent of GDP.
The CPC is seeking up to 4.1 billion US dollars of credit lines from India and Oman after record money printed to target interest rates in 2020 and 2021 had created severe forex shortages.
The credit lines will add to external public debt sector with non-financial corporations. (Colombo/Nov18/2021)