The Middle East Conflict Hits Sri Lanka’s Tea Industry, Heightening Economic Strain

The ongoing war in the Middle East is casting a long shadow over Sri Lanka’s tea industry, which has been struggling for years. The country’s $1.5 billion tea exports, employing 2.4 million people, are feeling the pinch as energy costs skyrocket and logistics grind to a halt.

Sri Lanka’s tea industry has always been vulnerable to fluctuations in global demand and prices. However, the current crisis is different due to the war in the Middle East disrupting oil supplies and driving up energy costs. This has made it harder for tea producers to get their products to market, resulting in a 17.3% year-on-year decline in exports in March, with significant drops in shipments to Iraq and the UAE.

The impact on workers is stark. Tea plantation employees, who earn between 1,350 and 1,750 Sri Lankan rupees per day (just above the national minimum wage), are struggling to make ends meet. Over half live below the World Bank’s international lower-middle-income poverty line of $3.65 a day. The Movement for Plantation People’s Land Rights estimates that plantation workers face “crisis after crisis,” with many forced to cut back on meals and some abandoning their posts in search of better-paying jobs.

Dilmah, one of Sri Lanka’s largest tea companies, is also feeling the pinch from within. Chairman Dilhan Fernando notes that fuel costs and logistics problems are fuelling inflation everywhere. To mitigate this, Dilmah is accelerating its push into new markets, including Canada, South America, and the US.

However, even as tea producers seek to diversify their exports, they face a daunting task: reviving an industry battered by years of neglect and underinvestment. Sri Lanka’s economy is already reeling from the conflict’s fallout, with fuel prices up 40%, supplies rationed, and Wednesdays declared public holidays to conserve energy.

For workers like Jacintha Malar, the situation is precarious. As she puts it, “we don’t know whether we can cope.” With a prolonged Middle East conflict looming large, many people will face hardship. The question is: what next for Sri Lanka’s tea industry?

The government has promised to support the industry, but its efforts so far have been patchy at best. A comprehensive plan to boost exports and invest in infrastructure is urgently needed. In the short term, producers must adapt quickly to changing market conditions and find new routes to market.

As Sri Lanka’s economy grapples with the fallout from the Middle East conflict, a more fundamental question looms: what does this mean for the country’s economic future? The tea industry is not just a key sector – it’s also a symbol of Sri Lanka’s colonial past. Can the government find a way to revive this industry and create jobs for the millions of workers who depend on it?

The stakes are high, but one thing is clear: the Middle East conflict has exposed the fragility of Sri Lanka’s economy. As the war rages on, the country must act fast to stabilize its industries, support its workers, and build a more resilient economy for the future.