By:Staff Writer
April 09, Colombo (LNW): In a special Parliamentary address yesterday, President and Finance Minister Anura Kumara Dissanayake announced a Rs. 100 billion relief package aimed at mitigating the domestic impact of the ongoing Middle East conflict. This move, framed as a targeted support measure for vulnerable sectors, comes amid growing economic pressures and obligations under IMF guidelines.
Dissanayake drew parallels with past crisis interventions, noting that the government had previously allocated Rs. 50 billion to address the Ditwah disaster. “Governance entails responding to crises with timely support. This Rs. 100 billion package is designed to sustain livelihoods over the next three months, with potential for expansion if conditions worsen,” he said.
The relief measures focus on controlling inflation and interest rates, with the President highlighting an objective to maintain bank lending below 10% and inflation under 5%. He also warned that any appreciation of the US dollar could intensify economic strain. The government intends to maintain uninterrupted energy and fuel supplies until the end of May, supported by a combination of subsidies and international agreements.
Fuel pricing has been partially liberalized for private distributors, while the state continues to control 57% of the distribution market. The three-month plan encompasses fuel, fertilizer, and gas, with targeted interventions for fisheries and smallholder farmers. Diesel subsidies of up to Rs. 100 per litre will apply, with an additional Rs. 50 per litre for standard fishing vessels. Multi-day vessels will receive Rs. 150,000 per voyage.
On fertilizers, the government has secured 14,000 metric tonnes at previous prices, sufficient for two cultivation cycles. Future imports, however, are priced between $600 and $850 per metric tonne, presenting potential risks for subsequent planting seasons. Fertilizer prices will be capped at Rs. 10,200 per bag, absorbing approximately Rs. 1.7 billion in subsidies. Tea smallholders and other crop producers will also see increased subsidies.
The Aswesuma program will provide direct payments to low-income households, increasing benefits across three tiers from Rs. 5,000–17,500 to Rs. 7,500–25,000. The overall social relief component of the package is estimated at Rs. 8.5 billion.
Dissanayake emphasized a balanced approach to cost-reflective pricing versus subsidies. While full cost-reflective pricing could protect the Treasury and state utilities, it would impose severe burdens on households and businesses. Instead, the government has opted for a hybrid solution, combining partial subsidies with market-aligned pricing.
Economists’ note that while the relief package addresses immediate vulnerabilities, its reliance on subsidies and fuel imports exposes the economy to foreign exchange pressures and fiscal risk. The government’s approach aligns with IMF recommendations but will require careful monitoring to prevent escalation in inflation or rupee depreciation.
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