Sri Lanka could face a Balance of Payments (BoP) crisis if the ongoing Middle East conflict continues for an extended period, economist Talal Rafi has warned.
Speaking to Ada Derana, Rafi said global oil prices are likely to keep rising amid the conflict, particularly as oil refineries in the region have reportedly come under attack in recent days, potentially affecting production.
He noted that higher oil prices could be accompanied by increases in global food prices, contributing to a surge in global inflation.
According to Rafi, Sri Lanka spends approximately US$ 4.5 billion annually on fuel imports. A 10 percent increase in oil prices would therefore place significant pressure on the Government’s current account, he said.
He cautioned that if global oil prices reach the US$ 100 per barrel mark, Sri Lanka could face serious external sector stress, potentially leading to a Balance of Payments crisis.
Rafi further pointed out that the conflict could negatively impact Sri Lanka’s foreign remittances and tourism earnings, both key sources of foreign exchange for the country.
While the ongoing hostilities are already having an economic impact, a prolonged conflict could have severe consequences for Sri Lanka’s economy, he added.
