### ⛽ Govt. to Maintain Cost-Reflective Fuel Pricing Amid Mid-East Tensions

The Sri Lankan Government has reaffirmed its commitment to cost-reflective pricing for energy and fuel, resisting subsidies despite rising global oil prices triggered by Middle East instability. • Fiscal Strategy & Inflation The Government will avoid using the Ceylon Petroleum Corporation (CPC) to artificially lower prices, aiming to protect state finances and debt market stability. Inflation is projected to remain manageable between 5%–6%, even with potential short-term spikes driven by supply-side energy costs. Macroeconomic stability is prioritized to keep interest rates low by reducing the need for government domestic borrowing. • Sectoral Impacts & Exports Tea: This sector is the most exposed, as the Middle East accounts for ~6% of Sri Lanka's total exports. Export Growth: While February performance is expected to be strong at 10%–12%, geopolitical tensions may dampen March growth by several percentage points. Competitiveness in manufacturing and logistics may face pressure from higher shipping and energy overheads. • Contingency Measures Instead of broad subsidies, the Government plans targeted support for vulnerable groups, such as the fisheries sector. Budgetary flexibility exists to reallocate capital expenditure to social safety nets if global conditions worsen significantly. Source: Based on provisional statements from the Ministry of Industry and Entrepreneurship Development (March 2026).