Business

Russia-Ukraine conflict: Economic implications for Sri Lanka

Published

5 years ago

2022/03/1

By Asanka Wijesinghe

The Russian invasion of Ukraine deepens the existing global economic woes – persistent supply chain bottlenecks and associated rising inflation – clouding the prospects of a smooth global economic recovery from the pandemic. The West, led by the US and the EU, swiftly imposed strict economic sanctions, targetting Russian banks, oligarchs, political leaders, and state-owned and private entities, generating additional uncertainty over the global economic outlook. The initial disunity in the West on cutting off Russia from SWIFT-a global financial telecommunication system that allows the smooth and rapid cross-border transaction of money- was resolved over the weekend. Such a move will inevitably make payments for Russian exports and imports hard. The ongoing military conflict in Europe could not have come at a worse time for Sri Lanka given its own prevailing high inflation, rising energy costs, and scarcity of foreign exchange. Against this backdrop, this article discusses the economic impact of the European conflict on Sri Lanka, the sectors that will be hit hard, and ways to mitigate the negative impact.

Global Economic Impact

Immediately after the Russian invasion on 24 February, commodity markets rallied up. The Brent spot price of a crude oil barrel reached USD 105 for the first time after 2014. Similarly, the cost of wheat futures for March 2022 in the Chicago Board of Trade (CBOT) exchange peaked, at its highest since mid-2008 (Figure 1). The Russian Federation and Ukraine-known as Europe’s breadbasket- are major cereal, fertiliser, critical minerals, and iron and steel exporters. Meanwhile, the Western powers were busy over the weekend in negotiations to tighten sanctions on Russia.

While the fate of Ukraine hangs in the balance, the consensus among analysts is that the Ukrainians were mounting a fierce and unexpected resistance, effectively increasing the costs for Russia. The US, EU and their allies are contributing to the military conflict by providing financial and military assistance to Ukraine while imposing sanctions on Russia to make dollar transactions difficult. Thus, the severity of the global economic impact will be determined by the scope and duration of the conflict and the effectiveness of Western sanctions.

Western countries will be keen to minimise the spillover effects of sanctions on their economies. Like Germany, the major European economies heavily depend on Russian energy, making it necessary to exempt the energy sector from sanctions. Indeed, the sanctions package unveiled by the Biden administration did not target the energy sector. As long as payments for energy-related transactions go through non-sanctioned and non-US financial institutions, an unconstrained flow of money is guaranteed. Thus, oil prices dropped with futures closing below USD 93 a barrel in New York. However, that optimism was largely fading in early trade on 28 February. The Brent price rallied over 100 dollars again while wheat, soybean, and corn futures were up. Cutting off Russia from SWIFT and imposing sanctions on the Russian Central Bank can deal a severe blow to the Russian economy in the long run. The collapsing ruble can be a harbinger of Russia’s economic collapse. A possible economic fallout will reduce Russian demand for foreign products, and if Russia cuts off natural gas to the European market, a likely outcome will be a recession.

Implications for Sri Lanka

Overall, Russia and Ukraine account for 2% of Sri Lanka’s imports and 2.2% of exports in 2020. However, both countries are vital import sources for wheat and export destinations for Sri Lanka’s black tea (Figure 2 and 3). Russia and Ukraine purchase about 18% of fermented black tea (>3kg) exported by Sri Lanka. Similarly, 45% of Sri Lanka’s wheat imports are sourced from Russia and Ukraine. In addition, more than half of Sri Lanka’s imported soybeans, sunflower oil and seeds, and peas are from Ukraine. Moreover, Russia and Ukraine are significant import sources for asbestos, semi-finished products of iron and steel, copper (cathodes), and potassium chloride for fertiliser.

Unless the Ukraine crisis is not solved immediately, the fuel and commodity prices can rally further. The inflationary pressure in the Western markets, especially in Europe due to high energy prices and supply chain bottlenecks, may reduce consumers purchasing power, lowering the demand for goods exported by Sri Lanka. Europe is a significant export destination for readymade garments, tea and spices, and seafood.

There is also a growing tendency for increased military expenditure in the long run, which might reduce the “peace dividends” for European households. For example, the German Chancellor committed 2% of GDP for defence expenditure, addressing an extraordinary session of Bundestag. Replacing consumerism with militarism will adversely affect countries like Sri Lanka that depend on the European export market. In addition, a prolonged crisis may impede Sri Lanka’s ability to purchase necessary raw materials like fertiliser. Importantly, Sri Lanka’s exposure to the situation is mainly through linkages to the commodity and European export markets rather than direct exposure to the two countries involved in the conflict.

Mitigation

Sri Lanka should focus on safeguarding access to vital raw materials and food commodities. Globally, responding to the crisis, countries are stockpiling grain and exploring alternative ways to do business with Russia in purchasing raw materials. Sri Lanka has limited options to mitigate the impact on already deteriorating food security conditions and access to raw materials. As wheat and rice are substitutes, high wheat prices may increase the demand for rice.

Thus, it is necessary to remove input shortages like fertiliser to ensure domestic production is adequate. Due to the current foreign exchange crisis, Sri Lanka’s ability to effectively face such shocks is constrained. Thus, the urgent priority is to resolve the current foreign exchange crisis to regain the ability to trade swiftly. Achieving debt sustainability and securing dollar inflows from multilateral institutes might be the options at Sri Lanka’s disposal. Then, entering forward contracts for raw materials and fuel and negotiations with friendly countries for food on predetermined prices are possibilities.

Link to Talking Economics blog:

Russia-Ukraine Conflict: Economic Implications for Sri Lanka

Asanka Wijesinghe is a Research Fellow at IPS with research interests in macroeconomic policy, international trade, labour and health economics. He holds a BSc in Agricultural Technology and Management from the University of Peradeniya, an MS in Agribusiness and Applied Economics from North Dakota State University, and an MS and PhD in Agricultural, Environmental and Development Economics from The Ohio State University. (Talk with Asanka – asanka@ips.lk)

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Business

Business, economic heavyweights converge in Colombo

Published

13 hours ago

2026/10/11

Thilina Walpola

Senior business leaders, economists and international development experts, alongside the Prime Minister of Sri Lanka, will headline the Sri Lanka Economic & Investment Summit 2026, organised by The Ceylon Chamber of Commerce on 12 and 13 October at the Shangri-La Colombo.

The Summit will open with a keynote address by T. Krishnakumar, Chief Executive Officer, Reliance Consumer Products Ltd, who brings more than four decades of experience in the consumer brands and FMCG sectors. Having previously served as President of Coca-Cola India and Southwest Asia, with extensive experience in building businesses and driving growth across emerging markets, Krishnakumar, more popularly known as Kk, now leads Reliance Consumer Products as it expands across categories and builds new customer, partnership and market opportunities.

Day 2 will bring together four international perspectives across discussions on economic resilience, regional connectivity, sector growth and digital transformation.

Lilia Aleksanyan, Senior Country Economist for Sri Lanka at the Asian Development Bank, will open the day’s discussions with a focus on Sri Lanka’s economic resilience. Her work covers the country’s macroeconomic outlook, policy advice and macro-fiscal and financial-sector reform. Her international policy experience also includes roles at the French Ministry of Finance and the French Central Bank.

The Summit will then turn to Sri Lanka’s connections with regional markets, with P. D. Singh, Chief Executive Officer, India & South Asia, Standard Chartered Bank, delivering the keynote for the session on trade corridors and value chains. Singh counts close to three decades of experience in banking and finance, with senior leadership roles spanning Standard Chartered, JPMorgan Chase Bank and HSBC.

The Sector Deep Dives will bring international perspectives to discussions on healthcare and energy.

Tushar Shroff, Chief Financial Officer, Zydus Lifesciences Ltd, will deliver the keynote for the healthcare discussion, drawing on more than three decades of experience in corporate finance, strategic investment and financial transformation. His career spans senior finance and leadership roles with ABB, Piramal Healthcare, Intas Pharmaceuticals and Vedanta Group, giving him a broad perspective on the business and investment decisions shaping the healthcare sector.

For the energy-focused deep dive, Edore Onomakpome, Regional Infrastructure Industry Manager for Bangladesh, Sri Lanka and Nepal at the International Finance Corporation, will bring extensive experience in infrastructure investment and project finance across emerging markets. Since joining IFC in 2013, she has held senior roles across Africa and South Asia, including managing IFC’s infrastructure portfolio across 16 countries.

The Summit will conclude its keynote programme with Prime Minister Dr. Harini Amarasuriya, who will deliver the keynote for “Nation Building in the Digital Age.” The Prime Minister also oversees the Ministry of Education, Higher Education and Vocational Education, bringing a direct policy perspective to discussions on digital transformation, innovation, education and the skills needed for a changing economy.

Together, these perspectives will bring regional, international and policy insight to SLEIS 2026 as Sri Lanka considers how to strengthen economic resilience, attract investment, deepen regional connections and develop new sources of growth.

Held under the theme “Positioning Sri Lanka in a Changing Global Economy: Resilience, Reform, and the Future of Economic Policy,” SLEIS 2026 will take place on 12 and 13 October 2026 at the Shangri-La Colombo.

The Sri Lanka Economic & Investment Summit 2026 is supported by its valued sponsors and partners. Platinum Sponsor – Standard Chartered Bank Sri Lanka, Gold Sponsor – VISA Worldwide (Pvt) Ltd., Bronze Sponsor – South Asia Gateway Terminals (Pvt) Ltd., Strategic Development Partner – Asian Development Bank, Telecommunication Partner – Dialog Telecommunication, Television Partner – Dialog Television, Session Sponsors – David Pieris Motor Company (Pvt) Ltd., Hemas Holdings PLC, Sunshine Holdings PLC, International Construction Consortium (Pvt) Ltd., Microsoft Sri Lanka (Pvt) Limited, Official Logistics Partner – Hayleys Advantis Limited, Official Airline – SriLankan Airlines Ltd., Official Hospitality Partner – Shangri-La Colombo, Airline Partner – China Eastern Air Holding Co. Ltd.

Registrations for SLEIS 2026 are now closed. The Ceylon Chamber looks forward to welcoming participants to the discussions on Sri Lanka’s future trajectory on 12 and 13 October.

Business

Commercial Bank launches ‘Prestige’ banking for HNW clients

Published

13 hours ago

2026/10/11

Thilina Walpola

Sharhan Muhseen, Chairman of Commercial Bank flanked by Sanath Manatunge, Managing Director/CEO and Hasrath Munasinghe, Executive Director/Chief Operating Officer at the launch of Commercial Bank Prestige Banking

Commercial Bank of Ceylon has launched ‘Prestige’, a three-tier banking proposition aimed at high-net-worth (HNW) clients, combining wealth management, advisory services and lifestyle benefits.

The initiative replaces the bank’s existing ‘Elite’ private banking brand with Ruby, Sapphire and Diamond tiers, designed to cater to customers according to their wealth profiles and banking relationships.

The bank said Prestige would provide dedicated relationship managers, priority branch services, preferential rates on loans and deposits, enhanced card privileges, family banking programmes and offshore account solutions.

Its wealth and investment management services include access to capital-protected income solutions, dual-currency investments, institutional deals and estate and portfolio governance.

Clients will also have access to specialist financial and corporate advisory services, including assistance with international relocation, overseas property and capital repatriation.

The programme includes lifestyle benefits such as VIP airport lounge access, travel concierge services, property management and medical coordination, as well as access to selected art and culinary events.

The bank said its flagship Prestige banking residence at R.G. Senanayake Mawatha, Colombo 07, had been refurbished, with the service to be extended to other economically important cities.

Commercial Bank Managing Director/CEO Sanath Manatunge said Prestige was intended to support customers in managing their wealth, business interests, family needs and long-term legacy.

Existing Elite clients are being transitioned to the new programme, the bank said.

Business

Ceylinco Life rewards 80 sales achievers with overseas tours

Published

13 hours ago

2026/10/11

Thilina Walpola

Ceylinco Life has rewarded 80 members of its sales force with overseas tours to Vietnam and China for their outstanding performance in the company’s 2025 sales competitions.

The group comprised 62 sales achievers who travelled to Vietnam and 18 who visited China.

The Vietnam tour included visits to Hanoi’s Ho Chi Minh Complex, One Pillar Pagoda, Tran Quoc Pagoda and Hoan Kiem Lake. The group also travelled to Ha Long Bay, where they went on an Aurora Cruise and explored attractions including Sung Sot Cave, Luun Cave and Titop Island.

The tour also featured a sunset party aboard the cruise, with music and refreshments.

The 18 achievers who travelled to China visited several of Beijing’s major historical and cultural attractions, including Tiananmen Square, the Forbidden City and the Summer Palace. They also took a boat ride on Kunming Lake.

A highlight of the China tour was a visit to the Mutianyu section of the Great Wall, including a round-trip cable car ride. The group also attended an acrobatic show at Chaoyang Theatre and visited the Panda Garden at Beijing Zoo.

The company said the tours were organised to recognise and reward sales personnel for their performance and achievements.