Underpriced energy funded with bank loans, which are ultimately accommodated by central bank credit (printed money) causes frequent balance of payments trouble in Sri Lanka leading to currency depreciation and inflation.
In Sri Lanka there is a peculiar belief that inflation is related to petroleum prices - specifically diesel - despite repeated evidence to show that manipulating energy prices with central bank credit causes both inflation to go up and currency to depreciate.
In most low inflation countries, diesel is priced higher than petrol and the prices change daily.
Opposition groups also oppose fair and transparent pricing when it is attempted.
In February the current administration partly corrected the diesel mis-pricing as part of efforts to recover from balance of payments trouble, but the elected political genre that is currently in opposition heavily criticized the move.
Analysts have said that cost-based pricing is needed to ensure economic stability as well as soci