Escalating military tensions between India and Pakistan are beginning to send shockwaves across South Asia, with Sri Lanka’s vital tourism and shipping industries bracing for potential fallout, according to a recent report by Asha Securities Research, cited by the Daily Mirror.
The report paints a cautious picture for Sri Lanka, warning that heightened hostilities between the two nuclear-armed neighbours could have indirect but significant consequences for the island’s economy. In particular, national carrier SriLankan Airlines is expected to face rising operational costs, as the closure of Pakistani airspace forces longer, fuel-intensive flight routes to Europe. The added burden comes at a time when the airline is already struggling with ongoing financial and logistical difficulties.
The tourism sector, a cornerstone of Sri Lanka’s post-crisis economic recovery, is also under threat. Indian tourists who accounted for roughly 20% of arrivals in recent years may begin to reconsider travel plans amid regional instability, potentially derailing recovery hopes for 2025. Asha Securities warned that even perceived risks to safety or disruptions in travel corridors could delay the tourism sector’s rebound in a fragile economic environment.
Compounding the issue, the report highlights concerns in the shipping industry, especially after India reportedly advised key transshipment hubs, including Colombo, Dubai, and Singapore, to avoid facilitating the re-export of Indian goods to Pakistan. While Colombo Port continues to operate and remains outside the immediate conflict zone, its position as a strategic regional hub could be undermined if geopolitical tensions escalate or trade directives become more restrictive.
Sri Lanka’s trade dependence on India further raises the stakes. In 2024, the island nation exported goods worth approximately US$782 million to India while importing around US$3.5 billion. Any long-term deterioration in India-Pakistan relations, the report notes, could introduce new hurdles for bilateral trade and logistics.
“Colombo’s role as a transshipment hub hinges on geopolitical stability,” the Asha Securities report stated, emphasizing the importance of a calm regional environment for Sri Lanka’s economic resilience.
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