IMF Warns Sri Lanka Must Urgently Diversify Trade to Withstand Global Tariff Disruptions

IMF Asia-Pacific Director Krishna Srinivasan issued a direct warning to Sri Lanka and comparable small open economies in January 2026: diversify trade or face serious exposure to rapidly shifting global trade patterns. The IMF's prescription for Sri Lanka is to urgently deepen existing free trade agreements with Singapore and Thailand, conclude stalled comprehensive partnership negotiations with India and China, and explore new relationships with Gulf and ASEAN partners.

Sri Lanka's export basket remains concentrated in a narrow range of goods and markets, leaving it structurally vulnerable to shocks from any single trading partner. The warning came amid escalating protectionism among major economies at a pace not seen since the 1930s, with large nations imposing new tariffs and non-tariff barriers rapidly. Sri Lanka's trade negotiators are reported to be engaged in intensified discussions with India and China, while the government has also signalled interest in Gulf Cooperation Council and ASEAN trade partnerships as part of a broader diversification agenda.