Austerity measures in the wake of ME conflict

Sri Lankans are slowly but surely beginning to feel the effects of the ongoing conflict brought on by the U.S/Israel attack on Iran which is now engulfing the Gulf States as well. Within the past two days both fuel and gas prices have gone up with prices for essential and non-essential goods also on the rise.

President Anura Kumara Dissanayake has assured that there are adequate stocks of fuel for the next two months but the Chairman of the Ceylon Petroleum Corporation (CPC) D.J.A.S De S Rajakaruna has requested the public to use fuel sparingly and curtail non-essential travel. That’s the difference between the remarks by politicians who are keen to please the public even when the situation looks dire while the bureaucrats are in the unenviable position of having to deal with the fallout of the intensifying conflict in a region not too far from our shores.

Sri Lanka has had more than its fair share of debacles after the end of the 30 years separatist war in 2009. There was a breather for the public for a few years, but in 2019 there was the Easter Sunday terrorist attacks followed by the COVID-10 pandemic and then the 2022 economic crisis. The country as just recovering from these triple blows – and not forgetting Ditwah - when the Iran attacks began two weeks ago and there is the likelihood that the country will once again be pushed towards economic instability as well as social unrest.

Any instability affecting the Gulf States in particular deals a heavy blow to Sri Lanka. There are more than 1.3 million Sri Lankans employed in the region including in Saudi Arabia, the United Arab Emirates (UAE), Bahrain and also Israel. They send valuable foreign exchange that keeps the economy going to a large extent. Given the uncertainty in the region, there may be some who would want to return to the safety of their homes. While it will not only be the foreign exchange that will drop, those who return will have to find employment which would also be challenging.

Then there is the tourism sector which has already seen a 20 % drop over same time last year. The disruption of flights through the world busiest transit hubs such as Dubai and Doha has led to the d decline in tourists arrivals, particularly of those coming from Europe. British Airways said this week that it was cancelled all its flights to the Abu Dhabi till the end of the year which does little to encourage visitors to come through these destinations. 

On top of that several countries have also updated  new travel advisories is , which don’t necessarily warn of heightened threats in Sri Lanka, but just new advisories that can be discouraging for those travelling from long distances given the uncertainty of the global situation.

Then there is the disruption of tea exports as well as export of other goods to the Middle East and Gulf region. There is also the increase in oil and LNG prices due to the ongoing conflict which have a direct bearing on the country. While authorities say they have emergency plans in place, it’s likely that a fuel quota system will need to be introduced while the public may have to deal with power cuts and shortage of domestic gas in the weeks ahead.

The Government was just trying to get its act in order after the devastation caused by Cyclone Ditwah when this conflict erupted. After one and half years in office, it can no longer keep blaming previous Governments and has to handle the new challenges it faces. It’s understandable that the President will want to put on a brave face, but the reality is that Sri Lankans like many in other countries will need to tighten their belt soon. The challenge for the Government is to assure the public that it’s doing its best and hope that the public have enough confidence in the current rulers so that it can avoid any major social upheavals.