Sri Lanka is expected to face ongoing challenges related to debt management and volatility in food prices as the global trade war intensifies, according to a new report by a United Nations trade body.
The United Nations Conference on Trade and Development (UNCTAD), in a report released this week, stated that many low-income nations are confronting a “perfect storm” of deteriorating external financial conditions, unsustainable debt levels, and weakening domestic economic growth.
“Food price volatility will remain a risk, and complexities around debt will continue to affect economies such as Bangladesh, Pakistan, and Sri Lanka,” the report emphasized.
The global economy is projected to follow a recessionary path, with overall growth expected to slow to 2.3 percent this year. The slowdown is attributed to escalating trade tensions and rising uncertainty, UNCTAD noted.
Sri Lanka, already burdened by severe debt issues, was recently subjected to a 44 percent tariff imposed by U.S. President Donald Trump. However, the U.S. administration later announced a 90-day pause on the implementation of this tariff.
The United States remains Sri Lanka’s largest export destination, accounting for approximately USD 2.9 billion in annual exports.
The UNCTAD report highlighted several mounting global threats, including trade policy shocks, financial volatility, and a surge in economic uncertainty.
“Trade policy uncertainty is at a historical high,” the report stated, “and this is already translating into delayed investment decisions and reduced hiring.”
While the economic slowdown is expected to impact countries worldwide, UNCTAD expressed particular concern for developing nations and the most vulnerable economies.
The report also pointed to the increasing volume of trade among developing countries—referred to as South-South trade—as a potential buffer against global shocks.
In conclusion, UNCTAD called for enhanced dialogue, negotiations, and stronger coordination of regional and global policies in response to the worsening trade environment and slowing growth.
“Coordinated action will be essential to restore confidence and keep development on track,” the report concluded.
