From sandcastles to survival: Sri Lanka in the age of Trump waves

US President Donald Trump

Preparation often matters more than planning in governance and business, especially in critical situations and highly interdependent environments. Sri Lanka should have recognised the possibility of a full-scale Gulf conflict if it had carefully considered the broader implications of the recent tariff hikes under the Trump administration. Today, geopolitics is a powerful force that even shapes the direction and dominance of technological advancement.

Sri Lanka will face significant short- to medium-term impacts on remittances, exports, and tourism. These revenues are likely to decline gradually — if not drastically. But are we truly ready with alternatives beyond simply raising taxes and tightening belts?

For a country with relatively fragile economic and political structures, vigilance over emerging geopolitical uncertainties is essential. Strategies must be developed proactively to adapt to changing global dynamics rather than reacting after disruptions occur. Political leaders may make promises and bold public statements about “what if” scenarios as part of standard political practice, but such rhetoric alone cannot address real-world challenges.

Sri Lanka, meanwhile, has been building “sandcastles” ever since the economy was liberalised. A large share of the country’s revenue sources resembles these fragile structures — highly vulnerable to the “waves” of global economic and political shifts. Continued reliance on garment exports, tourism, remittances, traditional exports, and a limited range of agricultural products reflects a complacent policy mindset that has persisted among successive governments since 1977. This trajectory followed the dismantling of the manufacturing foundations established during 1970–1977, largely due to political rivalry rather than strategic economic reasoning.

Moreover, Sri Lanka has never pursued a clear long-term strategy to reduce its heavy dependence on fossil fuels and hydropower through a gradual transition to renewable energy. In many respects, the greatest barriers have been internal, with vested interests consistently obstructing genuine renewable energy initiatives to preserve the profiteering opportunities of a small, influential circle. While this narrow group enjoys short-term gains, the country ultimately becomes the victim — forced to bear the long-term economic and strategic costs. Now, Sri Lanka finds itself engulfed in the wider impact of the Gulf war.

Sri Lanka’s only viable option to emerge from the engulfing effects of the Gulf war is to implement a strategic, short-term reduction in indirect taxes. This would help stimulate consumption and safeguard the middle class, supporting the short-term sustainability of the economy for at least the next 12 months. “When the going gets tough, the tough get going”

Over the decades, successive governments have been trapped in cycles of political rivalry, repeatedly placing short-term political gains above the long-term goal of building a resilient and progressive national economy.

Sri Lanka managed budgets, but never managed economic strategy.

Governments have rarely pursued a coherent economic development strategy. Policy making has largely revolved around conventional annual budgeting, focused primarily on passing expenditure plans through Parliament. The budgeting process has typically been driven by the need to meet government expenditure rather than to explore or create new, sustainable sources of revenue. The resulting fiscal gaps have routinely been financed through borrowing, leading to an overreliance on international lenders such as the IMF and the World Bank, whose priorities have not always aligned with the long-term welfare and structural progress of the country.

At the same time, little strategic planning has been undertaken to develop new industries, diversify revenue streams, or consolidate and protect established export sectors such as coconut, rubber, tea, cashew, and spices. In many cases, it has been the private sector — through value addition, branding, and marketing efforts — that has sustained these industries. Without such initiatives, even Sri Lanka’s flagship export, tea, might have declined much earlier. In fact, the industry has already been losing ground, as countries that once lagged behind have steadily captured global market share once dominated by Sri Lankan tea.

During 1988–89, the leadership managed to develop a network of garment manufacturing aimed at capturing export markets. The initiative was a notable success, cushioning the economic effects of the ongoing war while boosting household incomes by connecting rural talent with employment opportunities. Thanks to this effort, Sri Lanka still retains a foundation for manufacturing, though it has been gradually eroding due to weak policy frameworks and political interference.

However, Sri Lanka’s dependencies have remained high, leaving the country vulnerable to multiple external pressures. Global political and hegemonic interests have often leveraged mechanisms such as market access and tariffs, citing conditions that are not uniformly applied to other exporters. The use of GSP and GSP+ preferences to exert undue pressure on Sri Lanka is a classic example. This vulnerability largely stems from a long-standing reliance on competing primarily on price rather than on value, quality, or strategic market positioning.

Sri Lanka’s only viable option to emerge from the engulfing effects of the Gulf war is to implement a strategic, short-term reduction in indirect taxes. This would help stimulate consumption and safeguard the middle class, supporting the short-term sustainability of the economy for at least the next 12 months. “When the going gets tough, the tough get going”.

(The author is RIMS – CRMP (Certified Risk Management Professional) (USA) and could be reached via email at [email protected])