Sri Lanka struggles to avert economic collapse over Mideast war

## Summary
Advertisement Asia Sri Lanka struggles to avert economic collapse over Mideast war President Anura Kumara Dissanayake has rationed fuel, raised its price by a third and increased electricity costs by up to 40 percent since the war in the Middle East began. Click here to return to FAST Tap here to return to FAST FAST COLOMBO, Sri Lanka: Sri Lanka is struggling to prevent a repeat of its economic collapse four years ago, as the prolonged Middle East war compounds the fallout from a deadly cyclone in November. Fuel rationing has shortened queues, but on Thursday, the government began limiting water supply hours to conserve reserves and save pumping costs. "Compared to what we had in 2022... you're not seeing that level of protest," Fonseka told AFP. "Sri Lanka was just coming out of another disaster - Cyclone Ditwah - and the government imposed a state of emergency to deal with that." Fonseka said the wide powers that emergency laws give the authorities to arrest and detain suspects could be used to stifle any popular protests, raising serious concerns for rights activists. "We are in a situation where ... laws that are in place, and the way they are being used, raise the question of whether rights could be further eroded in the coming weeks and months," she said. Related: Sri Lanka announces four-day work week over fears war will drag Sri Lanka targets 3 million tourists to aid cyclone recovery Source: AFP/sz Newsletter Morning Brief Subscribe to CNA’s Morning Brief An automated curation of our top stories to start your day.

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Sri Lanka struggles to avert economic collapse over Mideast war
President Anura Kumara Dissanayake has rationed fuel, raised its price by a third and increased electricity costs by up to 40 percent since the war in the Middle East began.
Vehicles queue at a fuel station, as concerns grow over fuel supply following US-Israel conflict with Iran, in Ratnapura, Sri Lanka, on Mar 2, 2026. (Photo: Reuters/Thilina Kaluthotage)
04 Apr 2026 12:53PM
(Updated: 04 Apr 2026 01:01PM)
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COLOMBO, Sri Lanka: Sri Lanka is struggling to prevent a repeat of its economic collapse four years ago, as the prolonged Middle East war compounds the fallout from a
deadly cyclone
in November.
President Anura Kumara Dissanayake has rationed fuel,
raised its price
by a third and
increased electricity costs
by up to 40 percent since the war began disrupting global energy supplies.
Panic buying fuel in Sri Lanka has brought back memories of 2022, when the economy tanked, with inflation hitting 70 per cent after Colombo defaulted on its US$46 billion external debt.
The accompanying protests toppled the once-powerful president, Gotabaya Rajapaksa, who was accused of mismanagement and corruption.
But the Frontline Socialist Party (FSP) that led the "Aragalaya", or struggle, that ousted Rajapaksa has warned that Dissanayake's administration may be facing an implosion.
"We believe that a response to this economic crisis will come politically," FSP politburo member Duminda Nagamuwa told AFP.
"Because of the strength of the (government's) mandate, this economic shock is still being absorbed by the people without exploding politically," he said.
Dissanayake's leftist JVP, or the People's Liberation Front, won a two-thirds majority at the November 2024 parliamentary elections after his own victory two months earlier in the presidential poll.
"INTO AN ABYSS"
A vendor at Colombo's Pettah night market, Wasantha Jayalath, 55, said he voted for Dissanayake in 2024 hoping for better times, but felt the situation was getting worse.
"We voted ... thinking that a good, self-sufficient era would dawn for our country," Jayalath told AFP. "There is no such situation; instead, what we realise is that the country is going further into an abyss."
A trader at the capital's main wholesale market, Priyantha Sudharshana Silva, 53, is not blaming the administration for the crisis.
"Protesting won't help because the country is already in a difficult position," Silva told AFP. "We believe that moving forward, even with these difficulties, is a significant achievement."
STATE OF EMERGENCY
Human rights lawyer Bhavani Fonseka said protests have been subdued because people are preoccupied with the day-to-day challenge of securing supplies.
Fuel rationing has shortened queues, but on Thursday, the government began limiting water supply hours to conserve reserves and save pumping costs.
"Compared to what we had in 2022... you're not seeing that level of protest," Fonseka told AFP. "Sri Lanka was just coming out of another disaster - Cyclone Ditwah - and the government imposed a state of emergency to deal with that."
Fonseka said the wide powers that emergency laws give the authorities to arrest and detain suspects could be used to stifle any popular protests, raising serious concerns for rights activists.
"We are in a situation where ... laws that are in place, and the way they are being used, raise the question of whether rights could be further eroded in the coming weeks and months," she said.
DEADLY CYCLONE
Cyclone Ditwah, the worst disaster since the 2004 Asian tsunami, killed 641 people and affected almost the entire country late last year.
The cyclone, which triggered floods and mudslides, caused an estimated US$4.1 billion in damage, according to the World Bank.
The government announced plans in December for 500 billion rupees (US$1.6 billion) in extra spending to fund the country's recovery.
The money will be used to rebuild devastated homes, roads, bridges and railways, as well as for cash handouts to help people regain lost livelihoods.
Colombo also secured US$206 million in emergency financing from the International Monetary Fund (IMF) in December to deal with the aftermath of the disaster.
An IMF delegation is currently in Sri Lanka to review its four-year US$2.9 billion bailout loan before releasing a US$700 million instalment.
Sri Lankan authorities have said they may ask the IMF to modify the loan's austerity conditions, given the country's worsening economic circumstances due to external factors.
Related:
Sri Lanka announces four-day work week over fears war will drag

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## Expert Analysis

### Merits
- Dissanayake's leftist JVP, or the People's Liberation Front, won a two-thirds majority at the November 2024 parliamentary elections after his own victory two months earlier in the presidential poll. "INTO AN ABYSS" A vendor at Colombo's Pettah night market, Wasantha Jayalath, 55, said he voted for Dissanayake in 2024 hoping for better times, but felt the situation was getting worse. "We voted ... thinking that a good, self-sufficient era would dawn for our country," Jayalath told AFP. "There is no such situation; instead, what we realise is that the country is going further into an abyss." A trader at the capital's main wholesale market, Priyantha Sudharshana Silva, 53, is not blaming the administration for the crisis. "Protesting won't help because the country is already in a difficult position," Silva told AFP. "We believe that moving forward, even with these difficulties, is a significant achievement." STATE OF EMERGENCY Human rights lawyer Bhavani Fonseka said protests have been subdued because people are preoccupied with the day-to-day challenge of securing supplies.

### Areas for Consideration
- Dissanayake's leftist JVP, or the People's Liberation Front, won a two-thirds majority at the November 2024 parliamentary elections after his own victory two months earlier in the presidential poll. "INTO AN ABYSS" A vendor at Colombo's Pettah night market, Wasantha Jayalath, 55, said he voted for Dissanayake in 2024 hoping for better times, but felt the situation was getting worse. "We voted ... thinking that a good, self-sufficient era would dawn for our country," Jayalath told AFP. "There is no such situation; instead, what we realise is that the country is going further into an abyss." A trader at the capital's main wholesale market, Priyantha Sudharshana Silva, 53, is not blaming the administration for the crisis. "Protesting won't help because the country is already in a difficult position," Silva told AFP. "We believe that moving forward, even with these difficulties, is a significant achievement." STATE OF EMERGENCY Human rights lawyer Bhavani Fonseka said protests have been subdued because people are preoccupied with the day-to-day challenge of securing supplies.

### Implications
- But the Frontline Socialist Party (FSP) that led the "Aragalaya", or struggle, that ousted Rajapaksa has warned that Dissanayake's administration may be facing an implosion. "We believe that a response to this economic crisis will come politically," FSP politburo member Duminda Nagamuwa told AFP. "Because of the strength of the (government's) mandate, this economic shock is still being absorbed by the people without exploding politically," he said.
- Fuel rationing has shortened queues, but on Thursday, the government began limiting water supply hours to conserve reserves and save pumping costs. "Compared to what we had in 2022... you're not seeing that level of protest," Fonseka told AFP. "Sri Lanka was just coming out of another disaster - Cyclone Ditwah - and the government imposed a state of emergency to deal with that." Fonseka said the wide powers that emergency laws give the authorities to arrest and detain suspects could be used to stifle any popular protests, raising serious concerns for rights activists. "We are in a situation where ... laws that are in place, and the way they are being used, raise the question of whether rights could be further eroded in the coming weeks and months," she said.
- The money will be used to rebuild devastated homes, roads, bridges and railways, as well as for cash handouts to help people regain lost livelihoods.
- Sri Lankan authorities have said they may ask the IMF to modify the loan's austerity conditions, given the country's worsening economic circumstances due to external factors.

### Expert Commentary
This article covers sri, lanka, fast topics. Notable strengths include discussion of sri. Areas of concern are also raised. Readability: Flesch-Kincaid grade 0.0. Word count: 930.