COLOMBO: Sri Lanka will cut power prices by 22.5% from Tuesday, the utilities regulator said, as the Indian Ocean nation attempts to ease the cost of living for millions of people amid its worst financial crisis in decades.

After the crisis shrank its economy 7.8% in 2022, Sri Lanka boosted power prices by 75% that September, and by another 66% the following February, to meet the terms of a $2.9-billion bailout from the International Monetary Fund (IMF).

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Industries would also see a cut of about 33% in power tariffs, the regulator added, with poorer users getting a reduction of about 2,000 rupees ($7) in their bills.

“We expect this reduction to assist in the rejuvenation of the economy and help the public get relief,” Manjula Fernando, chairman of the Public Utilities Commission of Sri Lanka (PUCSL), told reporters on Monday.

The cut will help Sri Lanka stick to an inflation target of 5% set by its central bank, analysts said, in an economy expected to grow by 3% this year after a gap of two years.

Together with higher taxes, a weaker rupee and fuel cost increases, the power price hikes had pushed inflation in the nation of 22 million to a record high of 70% in September 2022.

But it declined to 1.7% in June, helped by a price cut of 21.9% in March this year.

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Sri Lanka’s four-year Extended Fund Facility with the IMF, finalised in March last year, requires the country to raise taxes, remove subsidies that have hit the power sector, and cut public sector debt.