Sri Lanka on Edge ECONOMIC FALLOUT OF MIDDLE EAST TENSIONS

Should tensions persist, it could lead to job losses or salary cuts in the GCC A 10% drop in private remittances could reduce foreign exchange reserves by $320 million

- By DR. KENNETH DE ZILWA

As tensions rise in the Middle s geopolitical tensions rise in the Middle East, economic position, reflected in its national balance sheet. The country, already facing the aftermath of a financial crisis, encounters compounded issues due to IMFmandated austerity measures and external pressures. Key sectors are under strain, threatening to impact the nation's financial stability and recovery.

Key Revenue Vulnerabilities

(A) Exports The recent escalation between Israel and Iran has created uncertainties in global markets, leaving Sri Lanka's economy particularly susceptible. The national balance sheet reveals a significant reliance on exports, with the Middle East accounting for 25% of Sri Lanka's tea exports. A 5% drop in orders could cost the country approximately $75 million annually. This decrease would negatively affect foreign exchange reserves, widening the trade deficit and impacting the overall balance sheet by increasing liabilities relative to assets.

(B) Private Remittances