IMF, officials discuss power tariff reforms ahead of November deadline

• IMF technical team reviews tariff methodology and reforms with key Govt. and Opp. MPs and bureaucrats 
• Officials tell IMF tariffs must balance cost recovery, renewable investments and affordability
• Stress need for tariffs to reflect actual cost of serving consumer demand, reducing unfair cross-subsidies
• Renewable energy target of 70% by 2030 central focus
• Highlights without recovering costs, inefficiencies multiply and hinder attracting new investment

The Parliament Secretariat yesterday said that an International Monetary Fund (IMF) technical team and MPs recently met to review the Ceylon Electricity Board’s (CEB) electricity tariff methodology and reforms ahead of a November 2025 deadline under the ongoing IMF Extended Fund Facility (EFF) program.

While the meeting was a technical review and not a policy formulating exercise, the Sri Lankan side had intervened to stress that the tariff methodology adopted for the energy sector must balance cost reflectiveness and cost recovery, renewables, and affordability.

An IMF technical team, led by Delphine Prady, held the joint meeting with the Committee on Public Finance (CoPF), the Committee on Public Enterprises (COPE), the Sectoral Oversight Committee on Infrastructure and Strategic Development, Government and Opposition MPs, and officials from the Energy Ministry, Finance Ministry, CEB, and the Public Utilities Commission of Sri Lanka (PUCSL).

During the discussions, it was noted that cost recovery ensures the sector as a whole covers its total expenditure, thereby preventing inefficiencies and attracting the investment and credit needed to modernise. 

Cost reflectiveness, meanwhile, ensures consumers pay based on the actual cost of serving their demand, reducing unfair cross-subsidies. It was stressed that without recovering costs, inefficiencies multiply and there is no way to attract new investment.

The country’s renewable energy target of 70% by 2030 was a central focus. Experts emphasised that to achieve this, Sri Lanka must establish the right infrastructure, financing, and incentive structures. 

Expanding solar, hydro, and wind energy, coupled with investments in storage and emerging technologies, such as green hydrogen, will be essential. 

While thermal power continues to play a role, it was described as “super expensive” and highly volatile, exposing the sector to global price shocks. Renewables, by contrast, were recognised as increasingly competitive but requiring upfront investment.

It was also cautioned that the volatility of generation costs poses risks to both financial stability and consumers. The need for accurate forecasting and careful planning to avoid passing sudden cost spikes onto households and businesses was underlined. 

It was discussed that tariff methodology must therefore provide not only cost recovery but also predictability, while steering investment towards least-cost and environmentally friendly generation.

MPs present highlighted the importance of safeguarding vulnerable households through targeted subsidies, protecting workers affected by restructuring, and ensuring efficiency gains translate into fair outcomes for end-users. 

Concerns were also raised over data integrity and transparency, with gaps in Power Purchase Agreements (PPAs), incomplete cost breakdowns, and weak information systems.

It was stressed that without stronger governance and regulatory independence, a modern and effective tariff methodology cannot be applied successfully. 

During the discussions, it was agreed that tariff reform cannot be treated as a purely technical exercise. It must be grounded in policy objectives that deliver a financially viable power sector, ensure a sustainable shift to 70% renewables by 2030, protect vulnerable communities, and strengthen transparency and accountability across the industry.