Cost-Recovery Tariffs Vital to Avoid Taxpayer Burden – IMF

COLOMBO (News 1st); The International Monetary Fund (IMF) has issued a clear warning to Sri Lanka, stressing that failure to implement key energy sector reforms—particularly cost-recovery electricity pricing—could lead to serious fiscal consequences and undermine the country’s long-term economic stability.

Responding to a question raised by News 1st’s Zulfick Farzan regarding the ongoing work-to-rule campaign by Ceylon Electricity Board (CEB) workers, IMF Mission Chief for Sri Lanka Evan Papageorgiou emphasized that reforms in the electricity sector are not only essential but form a core structural benchmark under the IMF’s Extended Fund Facility (EFF) programme.

Papageorgiou noted that the unbundling of the CEB and the broader transformation of Sri Lanka’s energy sector—set to accelerate in 2026 and beyond—are designed to bring greater transparency and operational efficiency. He stressed that cost-recovery pricing ensures that the CEB and its successor entities do not operate at a loss, thereby avoiding the transfer of financial burdens to taxpayers.

“This is one of the building blocks of the EFF programme,” Papageorgiou said, adding that the goal is to ensure the utility functions on commercial principles, making sound financial decisions like any private enterprise.

“Maintaining cost recovery electricity pricing is a continuous structural benchmark under our programme, which means that we have a continuous conditionality under the requirements that we have. It is paramount that containing fiscal risks and supporting long-term economic stability comes hand-in-hand with this,” he added.

The IMF’s current fifth programme review includes evaluating the electricity tariff submission by the CEB to the Public Utilities Commission of Sri Lanka (PUCSL), expected in October. 

Additionally, the Fund will assess the tariff methodology review due by end-November, as agreed during the fourth review.

Papageorgiou emphasized that stable and predictable electricity tariffs are vital for economic growth, investor confidence, and affordability for consumers.