Business

Russia-Ukraine conflict: Economic implications for Sri Lanka

Published

4 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

People’s Bank drives push towards cash-lite economy

Published

18 hours ago

2026/05/10

Thilina Walpola

Marking a significant milestone in Sri Lanka’s digital transformation journey, the National QR Payment Adoption Programme was recently launched with the objective of accelerating the country’s transition towards a cash-lite economy. The initiative aims to reduce reliance on physical currency by promoting the widespread use of QR-based digital payments, enabling individuals and businesses to conduct fast, secure and convenient transactions via mobile devices, said a release from the People’s Bank.

It said: As a leader in digital banking, People’s Bank proudly aligns with this landmark national initiative, reinforcing its commitment to building a digitally empowered economy. The Bank supports the programme through its flagship digital wallet “People’s Pay”, which offers a seamless platform for QR-based transactions and a range of everyday financial services.

In line with the programme’s objectives, customers can perform QR transactions without incurring additional charges, while merchants benefit from zero fees on transactions up to Rs. 5,000. To further encourage adoption, valuable gifts will be awarded to selected winners among LANKAQR users, enhancing engagement and promoting digital payment usage across the country.

People’s Bank’s participation reflects its ongoing digital transformation strategy, which has evolved beyond traditional online banking to deliver an integrated, lifestyle-oriented financial ecosystem. The Bank continues to set industry benchmarks by offering secure, efficient and user-friendly digital platforms, ensuring customers have uninterrupted access to banking services anytime, anywhere.

At the heart of this initiative is People’s Pay, a sophisticated digital wallet designed to streamline everyday financial transactions while catering to the evolving needs of the modern consumer. The application features a seamless self-registration process, comprehensive tri-language support, and secure storage of payment details, ensuring both convenience and security for users.

In addition, the People’s Pay app enables customers to make real-time bill payments and QR-based transactions with exceptional ease and efficiency. The facility to link multiple bank accounts further enhances flexibility and convenience, while the transaction limit provides users with greater financial control and improved security.

In a strategic move to bolster the national QR adoption program, the People’s Pay app now facilitates Peer-to-Peer (P2P) QR transfers. This functionality allows users to generate both static and dynamic QR codes, enabling efficient transactions without the need to disclose sensitive account information.

The National QR Payment Adoption Programme represents a critical step in advancing Sri Lanka’s digital payments landscape. By fostering fast, secure and transparent transaction methods, the initiative aims to ensure inclusive participation in the digital economy, empowering citizens across all regions and communities.

Business

ANC Campus and Adelaide University launch new Australian study pathway for Lankan students

Published

18 hours ago

2026/05/10

Thilina Walpola

ANC Campus has announced the launch of a formal articulation partnership with Adelaide University at Cinnamon Lakeside, Colombo, creating a clear progression pathway for Sri Lankan students seeking an Australian university degree.

Through this pathway, students can begin their university-level studies at ANC Campus in Sri Lanka before progressing to Adelaide University in Australia, subject to the relevant academic, English language, and entry requirements. By completing the first year through ANC’s Australian Diploma pathway in Sri Lanka, students can significantly reduce the overall cost of their Australian education journey, with estimated first-year savings of up to LKR 13 million when tuition and living expenses are considered.

The launch was attended by representatives of ANC Campus, Adelaide University, and the Australian Trade and Investment Commission (Austrade), alongside members of the media, students, parents, and invited guests. Austrade’s presence highlighted the continued importance of Australia-Sri Lanka education links.

Speaking at the launch, Dayan D. L. Fernando, Chief Executive Officer of ANC Campus, said the partnership gives Sri Lankan students a credible and well-supported route into Australian higher education.

“For over two decades, ANC has worked with international university partners to help Sri Lankan students begin their global education journey with the right academic preparation and guidance. This partnership with Adelaide University gives students a clearer route to an Australian degree and gives parents greater confidence in the pathway their children are choosing,” he said.

Fernando added that international education is one of the most important decisions a family makes, and proper guidance is essential.

“At ANC, our responsibility is to guide students correctly. We must help them understand the pathway, the requirements, the destination, and the opportunities ahead. ANC prepares students for the highest likelihood of success.

Business

Union Assurance honours new batch of certified financial advisers

Published

18 hours ago

2026/05/10

Thilina Walpola

Union Assurance PLC, Sri Lanka’s longest-standing private Life Insurer, recently hosted the SLIM Certified Financial Adviser Graduation Ceremony at its Head Office premises, recognising 38 professionals who successfully completed the programme, a milestone that reflects the company’s focus on building a highly capable and accredited sales force.

The Certified Financial Adviser programme, delivered in partnership with the Sri Lanka Institute of Marketing (SLIM), the National Body of Marketing in Sri Lanka, which was designed to elevate the expertise of the company’s high performing adviser force. Spanning 11 comprehensive modules covering areas such as Advanced Consultative Selling Skills, Negotiation Mastery, Digital Prospecting Techniques, and Emotional Resilience in Sales, participants underwent a rigorous learning journey that concluded with a formal assignment, bringing the full cohort to completion.

The programme reflects Union Assurance’s commitment to ensuring its advisers are positioned to serve customers with confidence, credibility, and genuine understanding of their needs; values that are central to the company’s purpose of protecting what matters most. The SLIM qualification also opens a structured educational pathway for graduates, with opportunities to advance through further nationally recognised certifications.

Speaking at the ceremony, Chief Agency Officer at Union Assurance, Imtiyaz Aniff stated: “We are pleased to recognise the dedication of our people who committed to this programme alongside their core responsibilities. The SLIM certification equips our advisers with the skills and credentials to serve our customers at a higher standard, and that directly supports the quality of advice we deliver. We look forward to seeing this cohort carry forward what they have learned and continue to grow in their careers.”

Union Assurance is a subsidiary of John Keells Holdings PLC (JKH), the largest conglomerate listed on the Colombo Stock Exchange, operating with over 80 companies in 7 diverse industry sectors. The Company has completed nearly four decades of success with a Market Capitalisation of Rs. 45.6 Bn and a Life Fund of Rs. 92.8 Bn as of end December 2025. Set to protect lives and enrich the well-being of all Sri Lankans, Union Assurance offers Life Insurance solutions that cover the health, investment, protection, retirement and education needs of Sri Lankans. With an island-wide branch network and a workforce that is over 3000-strong, Union Assurance continues to invest in people, products and processes with a customer-centric focus to be responsive to emerging changes in the Life Insurance industry.