“Russia’s invasion of Ukraine has increased the probability that Sri Lanka could default on its dollar-denominated debt. This raises the urgency for Sri Lanka to seek assistance from the international monitory fund.” ~ Ankur Shukla (Indian Economist)
There is no secret that Sri Lanka is presently fighting to get rid from the heavy economic crisis totally dragged the nations’ future in to a questionable stage. So far, the state has an approximately $7 billion overseas debt and interest repayment due. On the other hand, in accordance with the Central Bank statistics Sri Lanka owns financial obligation of $1.8 billion for the February and March months and available reserves below $ 1billion. Sri Lanka had recognized as the high-yield bond issuer in Asia and with current poor economical states there is a risk to default the debt like Zombie and Belize. Furthermore, the regular long hour power cuts, fuel deficit and rising living cost had totally disturbed the living pattern of Sri Lankans mainly the common general people.
Though we are not involving in the Russian & Ukraine conflict directly the conflict directly affects the dropping Sri Lankan economy adversely through multiple sectors which can be recognized as imports, exports and the tourism industry.
Overall, Russia and Ukraine accounts for 2% of imports and 2.2% exports in Sri Lanka. Mainly, Sri Lanka imports wheat from both Russia and Ukraine and it is 45% from total wheat imports. Though Sri Lanka is having high amount of wheat consumption we do not own a domestic production of wheat. Thus, approximately Sri Lanka has to import 1.29 million metric tons of wheat annually and compared with the past years there is a tendency to have a rapid up rise of wheat consumption in the Sri Lankan food culture. If those imports stop or delay there can be a considerable decline in Sri Lankan daily food consumption. On the other hand, we already know when the wheat price increased there is a pattern to move up the food and services in Sri Lanka. On the other hand, more than half of Sri Lanka’s consumer soybeans, sunflower oil and seeds, peas import from Ukraine. Also, both Russia and Ukraine momentous in semi-finished products of iron and steel, potassium chloride for fertilizer, stool, Asbestos and Rubber products.
In case of Exporting, Sri Lanka exports 18% fermented black tea to both Russia and Ukraine. Most significantly, in the year 2021 Ukraine had been purchased 4.2 million Kgs of tea from Sri Lanka and continually last 7 years the state had been purchased the similar or around amount of Tea from Sri Lanka. Currently, Sri Lanka is struggling to get rid from the Economic crisis arose with the scarcity of dollars. As the tea exports become the heart of the country’s international business if there will be a significant decline of supply that can be a considerable drop down towards our dying economy. On the other hand, that can be affected multiple layers in the tea plantation based society from top level to the tea state labors who work daily basis.
The tourism industry can be recognized as a crucial sector which will definitely affect from the ongoing conflict. In the year 2021, Russia turned into the second highest generator of tourists with 16,894 tourists while Ukraine became the fifth position with 7037 tourists. According to the Sri Lanka Tourism Development Authority, in this January around 20,000 Russian and Ukraine tourists had been visited Sri Lanka and that amount accounts for more than quarter of tourists so far. But this current conflict situation can be directly decreased the number of Russian and Ukraine tourists. While Sri Lanka was struggling to restore the tourism industry which totally dropped with the COVID-19 there was a relief that the Russian and Ukraine visitors came to the country. But now future visitors from those countries become unpredictable.
“Ukraine and Russian tourists were coming in significant numbers as the arrivals from other nations had dropped. Their absence now due to war could cause a huge slump again” (Shanthi Kumar (President, Hotel Association Sri Lanka)
The Russian Ukraine Conflict influences to the rise of Global fuel prices. That makes Sri Lanka’s current fuel deficit more complicated. On the other hand, when the global fuel price increased, travel to retentive haul destinations like Sri Lanka will be expensive with the high airfare cost.
“The Ukraine tensions have already badly affected the Sri Lankan economy and local oil prices may need to go up in this time” – (Ramesh Pathirana – Cabinet Spokesmen)
The Russian & Ukraine Conflict had mainly brought many considerable consequences towards the contemporary world economies. In order to deal with the crisis other states are working to store up grain and recognizing some alternations towards the deals done with the Russia and Ukraine. But, under current Sri Lankan economic decline we are not strong enough to store grain and restore the deals. Therefore, it is really important for us to identity a substitute to wheat. So far, we can use rice as a substitute. If we increase the consumption of rice sometimes we have to expect a demand towards rice and a move up of price there. But it is essential to have a balanced framework to manage the food security of the state.
Also, it is important for Sri Lanka to increase the domestic productions including fertilizer and rubber related products. On the other hand, as an answer towards the dollar deficit Sri Lanka has to open negotiations with the friendly countries and multilateral institutions.
It is unpredictable when the things will be settled and the economy will be stable. But through the recognition of the effects of the conflict still we have an ability to minimize the damages which can be converted the current situation worst.