Sri Lanka completes payment for Russian coal, easing power crisis

The country has been struggling to pay for critical imports due to paltry forex reserves

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A man waits to purchase diesel at a fuel pump in Colombo. – AP

By Reuters

Published: Thu 21 Apr 2022, 7:09 PM

Crisis-hit Sri Lanka has paid for two Russian cargoes to SUEK AG’s Singapore unit through a telegraphic transfer, two senior government officials told Reuters, in a move that is likely to help ease the island nation’s crippling power shortage.

Demonstrations have been held across the South Asian island country of 22 million people for weeks with the public angry over the government’s mishandling of the economy that has led to shortages of essentials and prolonged power cuts.

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Sri Lanka has been struggling to pay for critical imports including fuel and food due to paltry forex reserves, while many Russian firms are struggling to complete transactions because foreign banks are wary of doing business with them after Western nations imposed sanctions on Russia over its attack on Ukraine.

Government officials scrambled for days to facilitate payment for the cargoes which were stranded on the coast without unloading due to non-payment of dues, a top power ministry official said.

Power Minister Kanchana Wijesekera confirmed to Reuters that the payment had finally been made.

“We have paid for the two shipments of coal,” Wijesekera told Reuters.

Completing the payment is crucial for ensuring steady power supplies in the blackout-plagued country.

The official said state-run People’s Bank of Sri Lanka made a payment of $26 million in U.S. dollars for two cargoes carrying a total of about 120,000 tonnes of Russian coal to SUEK AG’s Singapore branch through a telegraphic transfer.

Payments of $30-40 million for two more cargoes of a total of 120,000 tonnes of South African coal supplied by Suek AG will be made in about a month’s time, the official said.

“These cargoes are sufficient enough to run the 900 megawatts power plant till September,” the official said, adding that the payments for the South African coal are backed by letters of credit issued by the central bank.

Nearly a third of Sri Lanka’s annual electricity demand is met by oil-fired power plants and a similar amount comes from coal and hydro power. However, generation varies with the seasons, and a lack of sufficient rainfall has hit hydro power generation.

Ensuring reliable, round-the-clock power will still depend on regular fuel supplies which Sri Lanka has struggled to pay for, but the secured coal supplies will ensure steady generation from its solitary coal plant, the official said.

“Around 25% we can supply using hydro now, about 30% from oil, and 40-50% from coal. So, coal supplies are critical,” the official said.

Reuters

Published: Thu 21 Apr 2022, 7:09 PM

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