US-Israel war on Iran raises prices and threatens Sri Lanka’s food security

By Rehana Thowfeek

Inflationary pressures are building in Sri Lanka as it faces the direct and indirect effects of the US-Israel war on Iran. While Sri Lanka is still recovering from a deep economic crisis and the recent impacts of Cyclone Ditwah, the downstream impacts of the closure of the Strait of Hormuz are a triple blow to already vulnerable Sri Lankans. 

Fertiliser 

• Sri Lanka imports all the fertiliser it uses [1], so Sri Lanka’s agriculture sector is highly vulnerable to import and energy price shocks.
• Sri Lanka imported 712,037 metric tonnes of fertiliser in 2025 [2].
• 57% of Sri Lanka’s fertiliser imports came from China. China is the world’s 2nd largest fertiliser exporter. China is the largest source of Urea (56%) and Ammonium Sulphate (99%) imports to Sri Lanka. China has halted fertiliser exports to preserve its own food production and security.

Sri Lanka’s fertiliser import by type of fertiliser. Based on 2025 import data from Sri Lanka Customs

• 22% of fertiliser came to Sri Lanka from West Asia [3].
• Sri Lanka imported 398,791 metric tonnes of Urea in 2025. 56% of Urea came from China. Gulf countries are important producers of nitrogen fertilisers like Urea. 34% of Sri Lanka’s Urea imports came from Saudi Arabia, Qatar, UAE and Oman.

Map showing Sri Lanka’s fertiliser imports and their source markets. Based on 2025 import data from Sri Lanka customs.

Food imports

• ~33% of Sri Lanka’s domestic supply of cereals (such as wheat, maize and millet) is imported. 2/3rds of Sri Lankans dietary energy supply is derived from cereals, roots and tubers [4].
• Sri Lanka imported 180,224 metric tonnes of Mysoor dhal in 2025 – 80% of this comes from Australia. Australian farmers have warned that food production could plummet by 50%.
• Sri Lanka imported 790,278 metric tonnes of vegetables, roots and tubers (potatoes, onions, garlic, pulses like Kidney beans and Chickpeas) – 40% of this comes from India. Around 49% of India’s nitrogen fertiliser imports come from Gulf countries – threatening India’s food production and Sri Lanka’s by extension.
• Sri Lanka imported 73,792 metric tonnes of dairy – 86% of this comes from New Zealand, most of this is the form of milk powder. New Zealand’s dairy cattle farming industry is reliant on imported intermediate goods for production so there might be an impact.
• Sri Lanka imported 459,895 metric tonnes of animal feed (poultry feed, prawn feed, fish food) in 2025 – 70% of this comes from the United States of America. US imports $8.4 billion of fertiliser per year – 14% of this comes from Saudi Arabia, Qatar and Israel.
• Sri Lanka’s milk powder importers and wheat flour companies have pledged to keep prices stable until the new year season, however prices at the bakery are set to rise while essential food importers have also signaled a 10-20% price increase due to higher fuel, freight and insurance costs.

Food security

• Sri Lanka’s official poverty line stood at Rs 16,421 in October 2025
• The World Bank estimates of poverty which measure the percentage of the Sri Lankan population living below $3.65 per person per day had doubled from 11.3% to 23.4% in 2024.
• The cost of a healthy diet, measured by the Food and Agriculture Organisation of the UN (purchasing power parity or PPP dollar per day) has increased from Rs 199.62 per person per day in 2019 to Rs 451.68 per person per day in 2024.
• The FAO estimates that 9.9 million Sri Lankans were unable to afford a healthy diet in 2024, which is around 43% of the country’s population.

Transportation and utilities

• The pump price of fuel increased this week – petrol and diesel prices increased by 20% while kerosene increased by 24%.
• The Cabinet of ministers approved a ~12% increase in bus fares. 
• The Public Utilities Commission of Sri Lanka (PUCSL) is considering an electricity price increase following a request by Ceylon Electricity Board (CEB) for a price hike of 13.6% for April-June 2025.

Sri Lanka’s food and energy security is threatened. Food insecurity rose rapidly during the economic crisis and has remained elevated since. Sri Lanka also experienced supply chain disruptions due to Cyclone Ditwah, and some sectors are yet to receive support for recovery.

Inflation has been relatively low in Sri Lanka the past few months, even dipping into negative or deflationary territory. This provides some buffers to absorb the price shocks. However, price hikes from on-going supply chain disruptions caused by the war will further strain already vulnerable communities and children. This is a triple blow to Sri Lanka’s vulnerable citizens. Urgent action is required to ensure food and nutrition security for them.

This analysis was written on 30th March 2026. Because this situation is developing rapidly, these insights are subject to change.

(Rehana Thowfeek is the Co-Founder and Director – Civic Education at Arutha)

Notes

1. Fertiliser consumption as a % of its fertiliser production is 1461% in Sri Lanka as measured by the Food and Agriculture Organization of the United Nations.
2. Import data from Sri Lanka Customs for year 2025.
3. West Asia is the westernmost region of Asia, encompassing nineteen countries including Saudi Arabia, Iran, Iraq, Turkey, and Israel.
4. Data from FAOSTAT. The cereal imports dependency ratio tells how much of the available domestic food supply of cereals has been imported and how much comes from the country’s own production. It is computed as (cereal imports – cereal exports)/(cereal production + cereal imports – cereal exports) * 100.