Sri Lanka said Tuesday that its economy was heavily burdened by the rising cost of global fuel prices and hinted that local retail prices of fuel may have to be raised.

As the price of crude oil went up to 70 U.S. dollars per barrel from its 2004 price of 34 U.S. dollars, the government's fuel subsidies have shrunk much needed funds for its development goals, the Finance Ministry said in a press release.

"The government has lost 25 billion rupees (about 250 million dollars) in 2005 on fuel subsidy to keep the fuel prices at current levels and a further 7 billion rupees (about 70 million dollars) on value added tax exemptions on fuel imports," the release said.

The ministry contends that if the government decided to float the local fuel prices based on global prices the local retail prices of fuel would have to be raised by at least 10 percent.

Sri Lanka imports all its crude oil requirements and the bulk of the imports come from Iran.

Following recent satellite and seismic surveys which indicated oil deposits off the island's west coast, the government has started doing preparatory work for oil exploration.

Source: Xinhua