Sri Lanka’s recent macroeconomic pressures are being driven primarily by an external energy shock linked to the Middle East conflict rather than the domestic imbalances that triggered the 2022 economic crisis, CT Smith Securities said in a macroeconomic update.
The brokerage said rising oil prices, higher import costs and pressure on the balance of payments had contributed to the slide in the rupee and the widening trade gap, but argued the underlying fiscal and external position remained on track.
CT Smith’s analysis pointed to elevated freight and insurance premiums on shipments transiting near the Strait of Hormuz, tightening US financial conditions, and renewed risk aversion across emerging markets as the primary drivers of the current pressure. Domestic demand, fiscal discipline and the banking system, it said, were broadly stable.
The framing is the first by a Sri Lanka-listed investment bank to explicitly characterise the current cycle as an external shock rather than a policy failure. It contrasts with opposition critiques that the slide reflects governance weakness, including the United National Party’s framing of the rupee’s fall from Rs.292 to Rs.354 since the change of government.
The brokerage’s view aligns with the Central Bank’s broader argument that imported inflation and external financing conditions explain the bulk of the pressure. CBSL Governor Nandalal Weerasinghe has previously framed the rupee depreciation in regional comparative terms, pointing to similar pressures across South Asia.
The analysis also echoes warnings from the United Nations Food and Agriculture Organisation over a Hormuz-driven price shock, which named freight disruption and oil cost spikes as the principal channels of contagion.
Other industry voices have taken a similar line. The Joint Apparel Association Forum recently endorsed the Central Bank’s view that a weaker rupee reflects global factors rather than domestic mismanagement.
CT Smith’s update is the fourth analytical intervention in the current cycle, alongside academic, industry-association and opposition-economist voices. It is the first from a Colombo-based brokerage explicitly to anchor the diagnosis in external rather than domestic causes.
