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Current Affairs

Sri Lanka’s longest power cuts

Date: 04 March 2022 Tags: Miscellaneous

Issue

 A seven-and-a-half hour daily nation-wide power cut has been announced by Sri Lanka to tide over its worst economic crisis.

 

Background

In the last 26 years, this is the longest power cut that has been announced. It has been forced to impose cuts due to its dwindling fuel supplies.

 

Details

  • The power cuts will be imposed on a rolling basis across different sections. This is the longest since 1996 when the country relied on hydropower and majority of its reservoirs became dry.

  • The government has asked treasury to ensure fuel import. To conserve energy, public offices have been asked to run without Air conditioners.

  • Sri Lanka says the problem it is facing is due to inability to buy fuel and not energy. This is due to foreign exchange crisis.

 

Problems arising

  • Public transport has collapsed due to inability to buy fuel. Hydroelectric power stations are also unable to fulfill power obligations due to ongoing drought.

  • The government is trying hard to find the resources to pay for fuel shipments that have arrived in the country.

 

Reasons for crisis

  • The island-nation is suffering from foreign exchange crisis due to collapse of its foreign revenue earning sectors such as tourism and tea.

  • The foreign reserves dropped by a whopping 24 percent to $2.36 billion in January 2022. The government has an obligation to pay more than $7 billion in 2022.

  • The taxes were also halved by the government in 2019 to boost spending. This has caused its finances to crumble.

 

Impact of Russia-Ukraine war

  • Russia is one of the largest importers of Sri Lankan tea, which is a major foreign revenue earner.

  • Russian tourists also make up a large chunk of foreign tourists visiting the island nation.

 

India’s support

  • India has opened a credit line with Sri Lanka for exporting food and fuel to the country. It has also carried out currency swap operations.

  • A visit by Sri Kankan finance minister to India is on the cards to formalize a deal on an economic relief package for the country.