By Thiloththama Jayasinghe, Jadetimes Staff
T. Jayasinghe is a Jadetimes news reporter covering Business News
CBSL emphasized that a broader conflict in the Middle East would significantly affect the Sri Lankan economy through critical variables such as tea exports, petroleum imports, and foreign remittances.
Key Points:
1. "Tea Exports": An estimated 46% of Sri Lanka's total tea exports are shipped to the Middle East. Obviously, disruption to this export source would greatly impact revenue from exports coming into the country.
2. "Petroleum Imports": More than 90 percent of Sri Lanka's requirement for crude oil and about 40 percent of refined petroleum are supplied by the Middle East. War would disrupt supplies and raise prices, together with widening the trade deficit.
3. "Diamond Exports": Israel takes up about 2 percent of Sri Lankan exports, while diamonds make up about 80 percent of these exports. The current war between Israel and Gaza is threatening to badly affect the diamond polishing industry.
4. "Foreign Remittances": The Middle East remains the single largest source for Sri Lanka, with a contribution of 53.7% in 2023. A prolonged conflict may lead to a reduction in the inflow of remittances and a reduction in foreign exchange reserves.
5. "Global Spillovers": CBSL further warned that such a spillover of the wider conflict could mean disruption to shipping routes, global inflation, and slackening tourism, together with a slowdown in global growth-all factors harmful to Sri Lanka's economy.
The CBSL generally said an escalation in the Middle East can have widespread implications on the Sri Lankan economy, ranging from disruption to trade to inflationary pressures.
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