As the US-Israeli war on Iran enters its 21st day, with the conflict increasingly spilling across the region, Anusha David poses a pertinent question to a cross-section of eminent persons, who voice their opinion on its impact on Sri Lanka and the situation ahead of us.

Krishan Balendra - Chairperson of the Ceylon Chamber
 
As Chairperson of the Ceylon Chamber, the most pressing vulnerability remains Sri Lanka’s exposure to external shocks, particularly those that are not within the control of Sri Lanka and that directly impact trade, logistics, and business continuity. The hard-won economic stability achieved over the past three years is now facing its third and most critical stress test, following the US tariff measures in April 2025 and the impact of Cyclone Ditwah. The Chamber has recommended that the Government designate a clear list of essential services and priority economic sectors to guide the allocation of critical resources, including fuel and foreign exchange, in the event of supply disruptions. A transparent, rules-based framework anchored on this prioritisation would help safeguard the domestic economy, exports, logistics, and essential services, while ensuring continuity of economic activity during periods of uncertainty.

Murtaza Jafferjee  - Chairman of the Advocata Institute and CEO of JB Securities Ltd
 
Sri Lanka is facing a perfect storm—externally driven, not self-inflicted—through five main channels:
1. Fuel: ~15% of current account outflows go to fuel. Global price increases, especially for diesel, kerosene, and aviation fuel (due to wider crack spreads), could push retail prices up sharply, driving broad-based inflation via transport and input costs. Petrochemical price rises will also increase packaging costs.
2. Fertiliser & Food: ~35% of fertiliser inputs come from the Persian Gulf. Rising prices—alongside higher global wheat, corn, and cotton prices—will raise costs for the Yala season, likely reducing fertiliser use and lowering yields.
3. Tourism: ~35% of arrivals transit through Gulf hubs. Disruptions will weaken arrivals in March (peak) and April (shoulder), reducing tourism receipts.
4. Tea Exports: ~35% of exports pass through Gulf ports. Rerouting via the Mediterranean is costlier, compressing margins.
5. Remittances: Of USD 8 billion in annual inflows, ~70% comes from the Middle East. Prolonged conflict risks job losses, return migration, and lower remittances.

Spillovers will amplify the impact as trading partners are also affected.

Geopolitically, Iran is unlikely to back down, while Israel has largely achieved its objective of degrading Iran’s capabilities. The remaining challenge is for President Donald Trump to engineer a credible off-ramp without losing political capital.

Policy-wise, the government is right to allow global price pass-through—this enables efficient adjustment via demand compression and substitution. However, targeted cash transfers are essential to protect the bottom 50%.

This crisis is a prime opportunity to push through deeper reforms—design policies that serve the broader population, not ones held hostage by narrow minority interests. The priorities are trade liberalisation and labour/land market reforms to diversify the economy, reduce external vulnerability, and build fiscal buffers.

Finally, use fiscal policy to accelerate electrification - we now have excess solar energy during the daytime. Railway electrification must move from rhetoric to execution. EVs are now cost-competitive, but the current tax regime penalises them by taxing motor output differently from ICE engines, which are based on displacement, an input variable. Moving fully to an ad valorem system would reduce distortions and support the transition without a loss of revenue to the government.
 

Prof. Anura Wijayapala - Department of Electrical Engineering, University of Moratuwa

The  Power and Energy sector is particularly sensitive to oil prices as well as to supply delays. Unlike many other countries, due to bad planning in the past, Sri Lanka produces 15 to 20% of its annual electricity requirement using petroleum oils. Globally, today, only 4% of electricity generation is produced using oil. Therefore, the government will have to face the very difficult question of whether to divert the limited oil available for power generation or transport. It is either power cuts or queues at the petrol stations. Both are bitter pills for the president and the government to swallow. This problem is further aggravated by the shortfall in electricity generation in the Lakvijaya power plant due to inferior coal.

It is reported that on average, there is a 100MW power production deficit due to the low calorific value of coal imported in the 2025/26 season, which has to be produced using diesel. This will need half a million litres of diesel every day. And the problem will be further aggravated after May, if the government fails to receive all 25 shipments needed for the period May to November, during which unloading of coal in Puttalam is not possible due to winds and high sea waves.

As per the present indications, there will be a shortage of 5 shipments, depriving us of about 300,000 metric tons of coal for power generation. If this shortfall is also to be covered with oil-based generation to avoid power cuts, the additional cost over the coal-based generation will run into 40 billion Sri Lankan rupees, which will have to be passed onto electricity consumers, skyrocketing the already high prices. The only solution to ease the situation, at least to a limited degree, will be energy saving, slowing down energy-intensive economic activities and using technology to limit energy use. Despite the prediction of the Central Bank of over 3% economic growth for 2026, Sri Lanka may end up with another year of negative economic growth as the year 2027 dawns.

Shea Wickramasingha - Group Managing Director, CBL Group.
 
From a CBL Group and broader food manufacturing perspective, global conflicts primarily expose vulnerabilities in supply chain dependency and cost volatility. The sector remains highly reliant on imported raw materials and packaging inputs such as wheat, sugar, dairy derivatives, and packaging, making it sensitive to global price shocks, currency fluctuations, and freight disruptions. In parallel, energy and fuel volatility continue to impact manufacturing and distribution costs, while extended lead times increase inventory pressures and working capital requirements. These challenges ultimately translate into affordability pressures for consumers, particularly in essential food categories.
 
For exports, there is pressure from freight increases as well as other input cost escalations. For contracts in hand, this is very challenging.
 
Against this backdrop, the most critical step toward building resilience is to accelerate the localisation and diversification of key supply sources. This has to be addressed as a country as well as individual organisations. Key inputs like energy must have a robust continuity plan when regular channels are disrupted, and timely interventions need to be expedited. 
 
Resilience involves developing strong local and regional supplier ecosystems, reducing dependence on single geographies, establishing strategic buffer stocks for critical materials, and fostering long-term partnerships with suppliers supported by risk-sharing mechanisms. However, this is easier said than done, as many inputs lack viable substitutes within Sri Lanka. Where feasible, we have consistently invested, over the years, in strengthening local supply chains through close collaboration with our value chain partners. Nevertheless, for certain materials, the country remains structurally dependent on imports, which requires bilateral partnerships. 

Such an approach strengthens supply continuity and cost stability while also enhancing national resilience by reducing external dependencies. For CBL, this ensures the consistent availability of essential products while safeguarding operational continuity in an increasingly uncertain global environment" 

Rohan Pethiyagoda - Sri Lankan biodiversity scientist, amphibian and freshwater-fish taxonomist, author, conservationist and public-policy advocate.
 
As in 2019-22, our biggest vulnerability is incompetent governance. Daily Mirror headlines these past three weeks say it all. The US attacks began on 28 February. Global fuel prices spiked. One week of inaction by the government. On 6 March, AKD claims “Sri Lanka is well placed to weather the Middle East conflict”, adding “we have already purchased nearly USD 700 million from the market”. Contrary to him, on 8 March, the Samagi Joint TU predicts an imminent fuel shortage. Finally, at midnight on 9 March, the government raised fuel prices.

But on 10 March, cabinet spokesman Jayatissa says “Sri Lanka is not expecting to reduce fuel consumption by contracting economic activities”. Contrarily, fuel rationing is announced five days later (and despite a Ministry for Digital Economy, the QR code is a shambles). Three days later, we’re down to a four-day work week (the perfect recipe for collapsing GDP). This fumbling and blundering is reminiscent of a government led by GR rather than super-smart AKD. Meanwhile, no mention of fertilisers from the Gulf (remember, Maha season commences in April). Impose exchange controls and a 25% incentive-driven electricity reduction now; and this time, don’t print money. The government must get its act together or face 2022 all over again.
 

Chayu Damsinghe - Head of Macroeconomic Advisory at Frontier Research
 
One of the most fundamental differences about Sri Lanka in the current context is that, compared to seven decades of running twin deficits, the economy is now running twin surpluses. We've done this for 3 years at a stretch, and each year has been a stronger twin surplus than the previous, with robust growth and low inflation as well. Any and all impacts of global volatilities then come through into this fundamentally and structurally different context. The micro-level impacts on individuals, firms, and sectors still exist - but the fundamental macroeconomic strength means that we are far more buffered than before and are able to bounce back much faster than before.

Roshan Perera - Economist & Team Lead Growth & Economic Transformation, Centre for Poverty Analysis
 
Buffers Hold, but Delayed Reforms Leave Sri Lanka Exposed
 
The Middle East conflict highlights Sri Lanka’s vulnerability to external shocks, given its heavy dependence on imported fuel, remittances from the Gulf, and a narrow export base. Rising oil prices increase the fuel import bill, widen the trade deficit, and add to inflationary pressures, while higher shipping and insurance costs and weaker global demand affect exports. A decline in remittances could further strain foreign exchange inflows, exerting pressure on the exchange rate and foreign reserves.

Despite these risks, Sri Lanka is better positioned than during the 2022 crisis. Foreign reserves have improved, government revenue has strengthened, inflation has eased under tighter monetary policy, and the automatic fuel pricing mechanism has reduced the fiscal burden. These buffers have helped contain the immediate impact of the conflict.

However, structural reforms have lagged. Limited progress in state-owned enterprise reform and energy security, trade diversification and labour market flexibility continues to constrain growth and resilience. Sri Lanka’s exposure to external shocks remains high. While short-term stabilisation is important, stronger and sustained economic growth, supported by deeper structural reforms, is essential to build resilience and reduce vulnerability to future shocks.
 

Ambassador Ravinatha Aryasinha, Former Foreign Secretary & Executive Director, Regional Centre for Strategic Studies (RCSS)
 
Sri Lanka’s foreign policy responses should be based on principles that can be applied to all countries, rather than being directed at or against specific countries. By framing its response in such a manner, not only does Sri Lanka maintain credibility, but it also avoids deeper entanglement in global rivalries, at a time when the major powers are trying to draw Sri Lanka into what is tantamount to a ‘zero-sum’ game. Any such bandwagoning would be suicidal, given that we have equally important, historically significant political, economic and strategic relations with all the major powers.

Despite not condemning the US-Israeli attacks and the killing of the Iranian Supreme Leader, Sri Lanka’s response to the circumstances arising from the sinking of the Iranian frigate, its granting of shelter to the second Iranian support vessel and its crew, its continuing effort to repatriate the dead Iranian sailors and the others injured and affected, and Sri Lanka’s decision not to co-sponsor the one-sided UN Security Council Resolution 2817 on 11 March in New York, co-sponsored by over 140 states, approximates a proportionate response on the foreign policy front.

Niraj de Mel - Immediate Past Chairman of Sri Lanka Tea Board

Sri Lanka’s tea exports remain heavily dependent on the Middle East, accounting for around 55% of volume and 50% of earnings. The ongoing conflict involving Israel, the USA and Iran has disrupted supply chains to this key market, particularly for low-grown teas, which make up two-thirds of national production and are largely cultivated by smallholders. This overdependence on a geopolitically volatile region exposes a critical structural vulnerability.

Shipments have been withheld, cargo has been returned mid-transit, and in some cases offloaded at unknown ports, leaving exporters in disarray. Escalating freight charges and war-risk insurance have compounded the strain. While auction prices have shown only a moderate decline due to continued orders and advance payments, a prolonged conflict could dampen demand.

With limited warehousing capacity, the risk of stock accumulation during peak production months is significant, placing downward pressure on prices and increasing financial stress across the value chain.

A single, practical step to build resilience would be for the government to expand national warehousing capacity, enabling the industry to absorb shocks, manage supply disruptions, and stabilise returns during periods of external volatility.
 

Kamal Munasinghe -  Senior Vice President - Colombo City Hotels JKH and General Manager Cinnamon Life at City of Dreams
 
Global conflicts may feel distant, but for Sri Lanka’s hospitality and tourism sector, their impact is immediate. The biggest challenge we face is perception. Even when the country is safe and fully operational, uncertainty abroad can influence how travellers feel about visiting us. This affects bookings, airline demand, and ultimately the many people whose livelihoods depend on tourism.
 
That said, Sri Lanka is no stranger to resilience. Time and again, we have adapted quickly—finding new markets, creating relevant experiences, and continuing to deliver the warmth and service we are known for.
 
The most important step we can take now is simple: clear and consistent communication. When the public and private sectors work together to share accurate, timely updates, it builds confidence and reassures travellers that Sri Lanka remains open, safe, and ready to welcome them.
 
From our vantage point at Cinnamon Life and City of Dreams, Colombo continues to be vibrant and full of energy. We are already seeing encouraging signs with increased connectivity and renewed interest—reminding us that our story is still a very positive one.

Dr. Paikiasothy Saravanamuttu - Founder, Executive Director of the Centre for Policy Alternatives (CPA)
 
This war seriously affects Sri Lanka in several ways.  It very pivotally impacts the price of oil and its attendant consequences for tourism and even remittances.  The longer the war takes, the greater the toll.  First and foremost, the public should avoid panic buying of oil and other commodities, as this can exacerbate the crisis's effects.  Secondly, reducing unnecessary consumption will help household budgets.  The government must stick to its policy of neutrality and support efforts to bring the war to a close.
 

Sharmini Boyle - Trustee, South Asian Women in Media -Sri Lanka (SAWM-SL)
 
The global war being played out in the Middle East is primarily a cause for concern for Sri Lanka’s economy, with the threat to worker remittances and, in particular, the disruption of fuel availability, which has brought back to our country, controlling mechanisms such as fuel quotas. The global tensions also have an effect on the media sector due to the increasing spread of misinformation, and especially the use of Artificial Intelligence. The developments of the past weeks have made it clearer to the media industry that greater skills and knowledge is needed to be able to work with AI tools to address the threats it poses.

It is for this reason that the South Asian Women in Media – Sri Lanka (SAWM-SL) recently initiated activities to equip a cohort of women in Sri Lanka’s media with essential skills and knowledge regarding AI, as well as explore how newsrooms should govern their use of artificial intelligence.  Scaled-up efforts of a similar nature would be a practical way to build media resilience. As AI tools facilitate the creation of sophisticated and harmful content, there is an urgent need for safeguards, verification practices and response mechanisms to counter misinformation and manipulation in order to prevent escalation of crisis situations in times of global conflict, and maintain trust in information providers.

Ambika Satkunanathan - Lawyer and former Commissioner of the Human Rights Commission of Sri Lanka
 
Given the deeply interconnected nature of the world, it is virtually impossible to contain the impact of global conflict. Reduced access to oil, the resulting price increase and disruption of supply chains, the decrease in the number of tourists visiting Sri Lanka and reduced remittances by migrant workers in the Middle East can have a devastating impact on the socio-economic rights of Sri Lankans, many of whom have barely recovered from the economic crisis and thereafter cyclone Ditwah. The safety of migrant workers in the Middle East, many of whom work as domestic workers or in blue-collar jobs, who are from marginalised communities and do not have resources to return to Sri Lanka, and may not wish to return to Sri Lanka even when the war intensifies, due to their precarious economic situation, is also a serious concern. As always, vulnerable and marginalised sections of society, such as women-headed households, persons with disabilities, persons working in the tea plantations, and those working in the informal sector, are the first and most often the worst affected. 

Harsha Amarasekera - President's Counsel, Chairman Sampath Bank PLC, Chairman Port City Economic Commission

We continue to monitor emerging vulnerabilities arising from global conflicts, including elevated oil prices, supply constraints, and downside risks to tourism and remittance inflows. However, it remains premature to draw firm conclusions, as short-term developments may not reliably signal longer-term trends.

Sri Lanka’s banking sector has demonstrated resilience across successive shocks — including the 2019 Easter attacks, COVID-19, and the 2022 economic crisis — with Capital Adequacy Ratios strengthening, supported by timely regulatory intervention.

In an increasingly BANI environment, priority should be given to investment in adaptive risk management and forward-looking stress testing to sustain resilience.

At the same time, the prevailing global environment presents an opportunity for Sri Lanka to position itself as a neutral and credible destination for investments as well as operations seeking continuity and risk diversification, with Colombo Port City offering an additional platform for Disaster Recovery Centres and business continuity operations to complement business in existing regional hubs. 

Thilan Wijesinghe -  Chairman & Managing Director TWC, Director Ventive Hospitality (India), Strategic Advisor to Altair
 
The key vulnerabilities are the disruption of export markets, especially for perishable goods, the onset of a global recession if sustained high oil prices persist, again impacting our exports, and a reduction in tourist arrivals, in particular due to reduced flights and domestic inflation caused by higher oil prices. 
 
A single practical step the government can take to make the biggest difference is to improve state sector efficiency, particularly the CEB, reducing dependency on private transport by allocating capital to upgrade railways and to fast-track new airport construction. Secondly, further streamline BOI and Port City legislation and capacity to attract high-quality FDI into priority sectors of the economy by enhancing institutional capacity and reducing massive bureaucratic hurdles impacting private investment.