Sri Lanka’s export sector is now confronting a multi-layered crisis, where global freight disruptions, falling demand, and rising domestic energy costs are converging to undermine competitiveness and long-term stability. Industry leaders warn that without structural reform, the country risks losing its position in global supply chains.
The Joint Apparel Association Forum (JAAF) has highlighted how ongoing instability in the Middle East is triggering widespread disruption in global shipping routes. Carriers are avoiding high-risk zones, introducing emergency surcharges, and reducing service frequency, all of which have driven up both sea and air freight costs to unprecedented levels.
At the same time, Sri Lanka’s apparel export performance is weakening. February 2026 recorded an 11.46% year-on-year decline, with sharp contractions across the EU, US, UK, and other markets. This reflects not only logistics pressures but also a broader slowdown in global demand, further weakening export momentum.
JAAF Secretary General Yohan Lawrence warned that the real burden is increasingly shifting onto exporters despite formal freight agreements. While most shipments operate under FOB or FCA terms, global buyers are pushing suppliers to share rising transport costs. This is squeezing margins at a time when operational costs are already elevated.
Disruptions in shipping operations are also creating logistical uncertainty. Cargo destined for Gulf markets has, in some cases, been offloaded prematurely at alternative ports, forcing exporters to track, recover, and reroute goods at their own expense. Industry sources say these practices are adding hidden costs and unpredictability to supply chains.
Beyond logistics, Sri Lanka’s structural energy challenges are emerging as a critical constraint on export competitiveness. Industry leaders argue that high electricity tariffs, dependence on fossil fuels, and delays in renewable energy integration are undermining the country’s ability to compete with regional manufacturing hubs.
Lawrence stressed that countries such as India are already benefiting from cheaper open-access renewable energy systems, while global buyers increasingly prioritise greener supply chains. In contrast, Sri Lanka’s energy pricing structure remains heavily dependent on imported fuel costs, exposing exporters to volatility.
He further noted that regulatory bottlenecks in implementing open-access power and renewable integration are preventing industries from accessing cheaper energy alternatives. Despite directives to improve efficiency, delays in reform are keeping production costs high.
The JAAF has called for urgent acceleration of solar, wind, and battery storage investments, arguing that energy reform is now as critical as trade policy. Without it, Sri Lanka risks losing export orders to countries with more stable and sustainable energy systems.
As freight instability, declining demand, and energy inefficiencies converge, exporters warn that Sri Lanka’s trade model is under unprecedented strain, requiring immediate and coordinated policy intervention.