📈 Mideast Conflict Poses New Risks to Sri Lanka’s Economic Recovery

A recent assessment by the World Food Programme (WFP) warns that escalating Middle East volatility threatens Sri Lanka’s stability through energy shocks, supply chain disruptions, and weakened external earnings. • Energy & Inflation: Global disruptions have kept oil prices at a four-year high. Domestic fuel prices rose 33%–40%, directly impacting electricity and transport. As Sri Lanka imports 63% of its energy, these costs are driving broad-based inflationary pressure. • Agriculture & Food Security: The country imported US$ 2.5 Bn worth of food in 2025. Rising costs for wheat, rice, and vegetable oil, combined with potential fertilizer shortages (100% of urea is imported), threaten the agriculture sector, which employs 26% of the workforce. • External Sector Vulnerabilities: Remittances: ~80% of inflows originate from the Gulf; instability threatens household income and forex reserves. Tourism: Contributed 9.4% to GDP in 2024, but is facing reduced airline capacity and declining arrivals. • Household Impact: While macroeconomic conditions improved post-2022, food security remains fragile following Cyclone Ditwah. Rising costs disproportionately affect daily wage earners and estate sector workers. _Source: WFP Assessment (Provisional Data)_