### 📈 Sri Lanka Economic Outlook: External Shocks & Internal Vulnerabilities

Provisional analysis based on recent economic commentary and IFPRI data (March 2026). Overall Economic Climate • Sri Lanka faces heightened vulnerability to energy shocks stemming from the Middle East conflict, compounded by a debt-ridden domestic economy. • Monetary poverty has tripled from 2019 to 2025, with 25% of households now classified as multidimensionally poor. • Food insecurity has increased fivefold, affecting roughly 33% of the population. Debt & Fiscal Position • The government reported recent market borrowings of US$ 700 Mn. • Debt negotiations resulted in a 'haircut' of approximately 7.5%, significantly lower than historical averages for similar crises. • Over 40% of households are currently in debt, facing severe repayment challenges following the devastation of Cyclone Ditwah. Sectoral Impact & Risks • Energy: Exposure to global oil price volatility remains a primary risk to industrial stability. • Agriculture: High levels of food insecurity and the impact of natural disasters threaten rural livelihoods and national supply chains. • Governance: Concerns persist regarding undisclosed defense agreements and the lack of an alternative Debt Sustainability Analysis (DSA). Key Concerns • High dependency on the Ceylon Chamber of Commerce for economic policy direction. • Increased risk of becoming a geostrategic target due to regional military tensions and undisclosed foreign agreements.