The state-run Sri Lanka Petroleum Corporation confirmed the new pricing structure on Tuesday, stating that diesel and petrol prices will be reduced in line with the recent decline in international oil prices.
Under the revised rates, diesel will be reduced by 25 rupees per litre, bringing it down to 382 rupees ($1.15), while petrol will fall by 20 rupees to 414 rupees.
The price adjustment follows a drop in global energy benchmarks after diplomatic signals emerged that the United States and Iran had agreed to hold talks aimed at de-escalating tensions and working toward ending their ongoing conflict.
Sri Lanka, which relies entirely on imported oil and also depends heavily on imported coal for electricity generation, had earlier been forced to sharply increase domestic energy prices when global costs surged. In the aftermath of the heightened Middle East tensions, petrol and diesel prices were raised by nearly 50 percent, placing additional strain on households and businesses already grappling with inflation.
Electricity tariffs were also increased by about one-third as authorities attempted to pass rising import costs on to consumers in order to stabilize public finances.
Officials have repeatedly warned that prolonged instability in the Middle East could threaten Sri Lanka’s fragile economic recovery, particularly given the country’s dependence on imported energy.
The government has also briefed the International Monetary Fund (IMF), which approved a $2.9 billion bailout package in March 2023, that sustained high global energy prices could derail ongoing recovery efforts and undermine fiscal reforms.
Under the IMF-supported programme, Sri Lanka is required to maintain cost-reflective pricing for fuel and electricity while limiting subsidies that could place further strain on public finances.
Sri Lanka remains in the midst of economic restructuring after defaulting on $46 billion of foreign debt in 2022, a crisis triggered by severe foreign exchange shortages. Since then, the country has relied on IMF assistance and ongoing reforms to stabilise its economy and restore investor confidence.