Cash-strapped Sri Lanka sharply hiked fuel prices to a record high, causing further pain to the country's 22 million people in its worst crisis since independence.
Sri Lanka has increased fuel and transport prices, a long-flagged move to combat its debilitating economic crisis, but the hikes are bound to exacerbate galloping inflation.
Power and Energy Minister Kanchana Wijesekera said on Tuesday in a message on Twitter that petrol prices would increase by 20 percent to 24 percent.
The minister added that diesel prices would rise by 35 percent to 38 percent with immediate effect and that the cabinet "also approved the revision of transportation and other service charges accordingly".
Wijesekera said that people would be encouraged to work from home "to minimise the use of fuel and to manage the energy crisis".
Food and transport price increases will flow through to food and other goods, economists said.
Sri Lanka is in the throes of its worst economic crisis since independence, as a dire shortage of foreign exchange has stalled imports and left the country short of fuel, medicines and hit by rolling power cuts.
The financial trouble has come from the confluence of the Covid-19 pandemic battering the tourism-reliant economy and rising oil prices.
In addition, populist tax cuts by the government of President Gotabaya Rajapaksa and his brother, Mahinda, who resigned as prime minister this month, have contributed to the crisis.
Economists have said fuel and power price hikes will be necessary to plug a massive gap in government revenues, but agree that it will lead to short-term pain.
Dhananath Fernando, an analyst for Colombo-based think tank Advocata Institute, said prices of petrol have soared 259 percent since October last year and diesel by 231 percent.
Prices of food and other essential goods have surged, he said.
"Poor people will be the most affected by this. The solution is to establish a cash transfer system to support the poor and increase efficiency as much as possible."
Prime Minister Ranil Wickremesinghe, appointed earlier this month, said last week: "In the short term we will have to face an even more difficult time period. There is a possibility that inflation will increase further."