As Sri Lanka's economy pivots from tourism, it's well placed to benefit from global trade and geopolitical jostling – new research

With its natural beauty, wildlife and culture, Sri Lanka is known as the “pearl of the Indian Ocean”, and attracts millions of tourists every year.

- BY HEMAMALI TENNAKOON (Senior Lecturer in Strategy and Management, Brunel University of London)

But my research suggests that the country might not be so reliant on tourism in the future, as it looks to become a major player in global maritime trade. The island’s numerous harbours and enviable location along international sea routes have led to major investment from China and the US, as they seek to extend their strategic influence in the region.

That investment is being welcomed after years of economic and political turmoil in Sri Lanka.

The Easter bombings of 2019 targeted Catholic Churches and hotels, killing 269 people and devastating tourism. The same year, significant tax cuts slashed government revenue before COVID did serious damage to the economy.

In 2021, a ban on chemical fertilisers led to nationwide agricultural failure, while excessive borrowing and money printing triggered soaring inflation, which peaked at 70% in August 2022. The country ended up failing to pay its foreign debts.

Following huge protests in 2022, and the resignation of the President, Sri Lanka began a major political and economic shift. It secured a bailout from the International Monetary Fund and implemented reforms aimed at stabilising the economy.

So far, some of the effects have been positive. Inflation has eased, investor confidence has improved and more tea, clothing and rubber products are being exported up.