Beyond the Crisis: Sectoral Paths to Durable Growth
The Sri Lankan economy has faced a series of external and internal shocks in recent years that weakened its long-term growth outlook. Despite defying post-crisis growth trajectories, fresh uncertainties from oil price shocks and climate-related risks suggest that the policy context to accelerate growth will be even more challenging. In this context, select policy recommendations to strengthen Sri Lanka’s economic foundations toward higher, durable growth are set out in this article. It draws on recent research by the Institute of Policy Studies of Sri Lanka (IPS), some of which is detailed in its forthcoming annual flagship report Sri Lanka: State of the Economy 2026.
From Pump to Plate: Understanding Oil Price Pass-through in Post-2022 Sri Lanka
Oil price fluctuations have historically impacted the cost of goods and services across the world. As the current global markets show an increase in crude oil prices from USD 65 per barrel prior to the start of the war to USD 102 per barrel (a 59% increase) and signal further increases, Sri Lanka finds itself in a similar, or even more volatile, situation than during the oil price hikes of the Russian-Ukrainian War in 2022.
Import Price Shocks of the Hormuz Crisis 2026: How Will This Affect Sri Lanka?
The closure of the Strait of Hormuz has unsettled global energy markets. According to the International Energy Agency (IEA), 20 Mn barrels of crude oil products were transported through the Strait in 2025, which accounted for a quarter of the world’s daily energy needs. The closure has driven fuel futures higher, with the Brent futures reaching USD 112 per barrel on 19 March 2026 (Figure 1). A phenomenon called “backwardation” is clearly visible in the fuel market, implying that spot market prices for “physical” fuel are significantly higher than futures prices for “paper” fuel.
Sri Lanka after IEEPA: Navigating Tariffs in a Volatile US Trade Environment
The US Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA) on 20 February 2026, creating uncertainty about future US tariff policies. The US has used IEEPA to impose reciprocal tariffs on trade partners and additional fentanyl-related trade measures for Canada, China, and Mexico since 2025. At the time of the Supreme Court ruling, Sri Lanka’s reciprocal tariff rate was 20%. The US administration quickly invoked Section 122 of the Trade Act of 1974 to maintain high tariffs. Section 122 allows a US president to address international payment issues.
MSME Recovery in Post-Ditwah Sri Lanka: Turning Geographic Data into Action
The recent cyclonic storm Ditwah disrupted micro, small, and medium enterprises (MSMEs) islandwide, caused by production disruptions, infrastructure damage (including roads and mobile networks), supply-chain interruptions, and reduced access to markets. Rapid responses were necessary for the MSME sector to restart business operations and reconnect to markets. In fact, the effects of Cyclone Ditwah might amplify preexisting vulnerabilities in the MSME sector, including a heavy debt burden, informality, susceptibility to domestic demand shocks, and limited technical capacity to build climate resilience.
Demystifying Hawala/Undiyal – The Not So Dismal Science:[…] believed that informal fund transfer operations in Sri Lanka have expanded considerably due to the wide gap between the…