Sri Lanka’s export sector is entering a period of renewed uncertainty as escalating tensions in the Middle East begin to disrupt trade flows, logistics networks, and market stability. Export Development Board Chairman Mangala Wijesinghe has cautioned that exports could shrink by between 5% and 8% in March, signalling a reversal from earlier growth expectations.
The Middle East remains a vital destination for Sri Lankan goods, accounting for roughly 8% of total exports. Within this region, the United Arab Emirates dominates as the primary buyer, followed by Iraq and Saudi Arabia. Together, these markets represent the bulk of Sri Lanka’s trade engagement in the region, making them highly sensitive to geopolitical instability.
In 2025 alone, Sri Lanka exported over $1 billion worth of goods to Middle Eastern countries, with Ceylon Tea comprising more than half of that value. This heavy dependence on a single product category exposes the country to significant risk, particularly when demand patterns or trade routes are disrupted by conflict.
However, the impact of the crisis extends beyond direct exports. A substantial share of shipments bound for major markets such as the United States, the European Union, and the United Kingdom depend on transit hubs in the Middle East. Disruptions to airspace, maritime routes, and rising fuel prices have created cascading challenges across the export ecosystem.
Exporters initially faced sharp increases in freight and insurance costs, along with shipment delays and shortages of raw materials. Although businesses have adapted to these conditions and resumed operations, progress has slowed considerably. Growth projections, once expected to reach 10% monthly, have already dropped to 7.5% in February and are forecast to decline further.
Despite these setbacks, demand for Sri Lankan goods remains resilient. Authorities expect a gradual recovery in export performance by mid-year, provided global conditions stabilise. The Export Development Board has introduced contingency measures, including market diversification and product expansion, to cushion the impact.
Meanwhile, policymakers are reassessing domestic trade reforms. Plans to remove import-related levies and non-tariff barriers are being reconsidered, as officials seek flexibility to protect exporters during this volatile period.
Globally, the situation reflects a broader breakdown in trade stability. The World Trade Organisation has described current disruptions as the most severe in decades, with rising energy costs and geopolitical fragmentation reshaping the international trading landscape.
Sri Lanka now faces a critical test: whether it can navigate these external shocks while maintaining export momentum. The coming months will determine whether adaptive strategies can offset the risks posed by an increasingly unpredictable global environment.