The Hon. (Dr.) Anil Jayantha - Minister of Labour and Deputy Minister of Finance and Planning

¶ 01 [11.17 a.m.]

¶ 02 Hon. Speaker, during this Adjournment Debate on the global war situation and its impact on Sri Lanka, some views suggested a domestic crisis and inadequate intervention. We must understand clearly what a crisis is. What we face is an external shock due to war, mainly affecting transport, oil and gas. Disruptions to maritime shipping are impacting Sri Lanka’s economy as they do globally. Our task is to manage it so it does not become a domestic crisis. Let me explain our measures.

¶ 03 First, this is a problem arising from a war between two States. Shipping disruptions have created issues in goods transport. Fuel prices rose rapidly, particularly refined products. Even crude-producing countries have increased prices. To limit inflationary impact, we will adjust domestic fuel prices by around 8 percent. If this persists, local fuel consumption may rise; we must be conscious of that.

¶ 04 Insurance has also been affected. Oil carriers, insurers and reinsurers have sharply raised war-risk premiums — from ~0.2 percent of vessel value to 1–3 percent — implying about US$750 million higher costs globally, roughly a 1,000 percent increase in premiums. Freight rates are up 20–25 percent, aviation fuel costs up about 100 percent.

¶ 05 We will manage two fronts: contain inflation and preserve financial stability. Under our flexible inflation targeting framework, we target 5 percent. In 2025 we kept inflation around that; in Jan 2026 it was 2.38 percent, in Feb 1.68 percent — well below target — giving us space to absorb fuel shocks without runaway inflation. Interest rates remain at lower levels consistent with stability.

¶ 06 On FX, the dollar is appreciating globally as funds reallocate; gold has moved accordingly. Yet the rupee remains relatively stable around 310–315 per US dollar, with limited depreciation. This moderates imported inflation.

¶ 07 On reserves, by end-2025 we rebuilt gross official reserves to over US$7 billion, supported by export growth. We anticipate some pressure on exports; therefore, the President is chairing continuous engagements with the Export Development Board and industry to mitigate impacts and provide Government support.

¶ 08 We acknowledge there will be impacts; our strategy is to minimize them. We will prioritize allocation of scarce fuel to essential services such as health and food distribution, with dedicated stocks. Public cooperation in voluntarily reducing non-essential consumption would help.

¶ 09 Tourism will face cancellations (20–30 percent already). With the season ending in a month or two, we will limit damage and plan to restore volumes via more direct connections to source markets.

¶ 10 Remittances: in 2025 they exceeded US$8 billion. The war’s effect, if any, will be visible from March/April data. January and February inflows increased year-on-year. Some workers may face temporary income or timing disruptions; we are working with the financial sector to sustain inflows and protect reserves.

¶ 11 Debt restructuring progress has improved investor confidence and ratings. SriLankan Airlines’ debt has been restructured. IMF 5th and 6th reviews were delayed by the cyclone; an IMF team will arrive by end-March. We expect both tranches by April/May, bringing about US$700 million in cash inflows. ADB (US$480 million) and World Bank (US$100 million) parallel support are also expected.

¶ 12 Our current account’s services balance reached a historic surplus of US$1,733 million in 2025, enhancing resilience. A committee under the Prime Minister is tasked to design targeted relief to reduce pressures on vulnerable groups. We will face this challenge together.

¶ 13 Thank you.