Sri Lanka Must Reshape Its Trade Strategy : IMF

COLOMBO (News 1st); Sri Lanka and other small Asian economies must accelerate trade diversification or risk severe exposure to global tariff wars and shifting supply chains, warns Krishna Srinivasan, Director of the Asia and Pacific Department of the International Monetary Fund (IMF).

Speaking in Colombo on the evolving global trade landscape, Srinivasan emphasized that Asia, long a major beneficiary of open markets and trade integration, has become increasingly vulnerable, especially since the onset of tariff tensions between the United States and China.

“Asia benefited a lot from trade integration, benefited a lot from openness to trade,” he noted. “So much so that when tariffs were imposed by the US, Asia was subject to the highest level of tariffs.” 

He cautioned that the same region which gained the most from openness is now at risk of bearing the brunt of protectionist measures.

Srinivasan stressed that for countries like Sri Lanka, the central lesson is clear: diversify or be exposed. 

Despite growing regional interconnectedness elsewhere in Asia, Srinivasan said South Asia remains the least integrated sub‑region.

“The least integration you have is in South Asia,” he observed. “So there I feel that having greater integration with your partners in the region within the sub‑region will take you a long way. ”

For small economies like Sri Lanka, he argued, deeper trade ties with neighbours, and broader diversification of exports and production, are not optional but essential for resilience.