• The human and economic balance of emergency imports

The scars left behind by the devastation wrought by Cyclone Ditwah will take far more than time to heal. Much akin to the 2004 tsunami, the pall of loss is masked by grief and despair. Entire neighbourhoods sit water-logged and silent, broken bridges lie across swollen rivers, while thousands of families try to navigate through the maelstrom that has usurped their lives.

As Sri Lanka gears for a significant rebuilding push post-cyclone, the urgent need to import essentials such as cement, steel, roofing sheets, medical equipment, generators, and water pumps could inadvertently increase the nation’s import bill. Such an expense comes at a moment where the country is trying to rebuild its fragile and nearly depleted foreign reserves.

For specific sectors, it is important to consider that large climate-related events have been a constant feature of South and Southeast Asia for a few years now. This affects the export sectors of all these countries, and higher export prices are a visible consequence, especially in agriculture. This continuous effect across the years is something to consider even when looking at individual events.

Emergency imports are not a matter of luxury but a moral imperative, especially at a time such as this. In the immediate term, the need for more imports is not merely an economic consideration; it is deeply and intrinsically human. 

Entire communities cannot be left to rebuild their homes from the mud and debris. The rebuilding costs are unavoidable because the alternative includes prolonged displacement, worsening poverty, health crises, and the further erosion of human productivity, which is far more devastating.

Yet the economic undertones of this humanitarian urgency cannot be overlooked, especially considering Sri Lanka’s recent journey to stabilise its foreign reserves, which has been slow, delicate, and dependent on disciplined import management. 

Despite factoring in these core considerations, global commodity prices remain volatile, shipping costs unpredictable, and credit conditions tighter than they have been in years. Policymakers therefore face a difficult dual reality: to rebuild swiftly enough to restore dignity and economic activity while ensuring the country does not slide backward into fiscal vulnerability.

Local industries and construction spending

World Economic Forum Economist and Expert Network member Talal Rafi expressed his views on benefits to local industries in relation to reconstruction spending. 

“The construction sector will benefit with the reconstruction work in terms of supplies and labour needed, which can support Small and Medium-sized Enterprises (SMEs) and also areas such as roofing, tiles, cement, and transport. But Sri Lanka is heavily dependent on imports for construction, with steel and cement industries being dependent on imports,” he said.

The nuance lies in how the nation sequences and prioritises what it imports – and how quickly. It is important to note that not all reconstruction materials carry the same urgency. Life-saving and access-enabling imports – such as medical machinery, temporary housing supplies, sanitation equipment, and power-generation units – must arrive first. Bulk materials like steel and cement, essential for large-scale rebuilding but less critical for immediate survival, could be phased and matched with transparent procurement and donor-supported financing.

There is also a path to turning necessity into opportunity. The surge in demand for reconstruction inputs could stimulate domestic production and employment if managed thoughtfully. Locally manufactured bricks, roofing materials, furniture for schools, and prefabricated units could provide livelihood support for SMEs, many of which endured losses of their own during the floods. 

Incentivising domestic production where feasible – without compromising on quality – may keep more value within the local economy and reduce reliance on expensive imports over time.

Import industry priorities

Frontier Research Head of Macroeconomic Advisory Chayu Damsinghe addressed whether the import industry should prioritise short-term recovery or long-term investments in climate-proof infrastructure and risk management. 

“My understanding is that these are likely to be one and the same right now, especially since immediate rebuilding is required and further new buildings are probably likely as part of Sri Lanka’s economic story. Any expansions are probably those that need to have climate-proof infrastructure purely from a risk perspective,” he said.

At the community level, the emotional toll of disaster cannot be accounted for by economic projections. The trauma of loss – of belongings, livelihoods, memories, even loved ones – cannot be offset by infrastructure alone. 

Rebuilding is not purely about replacing what was destroyed; it is about restoring normalcy, dignity, and hope. Investments in mental health services, community support networks, and education continuity are just as crucial as roads, bridges, and buildings, although they rarely feature in important discussions or budget lines.

Balancing humanitarian urgency with economic prudence will require more than a checklist. It demands coordination between the Government, development partners, private sector suppliers, and the communities themselves. It calls for credit lines structured to ease pressure on reserves, for targeted subsidies that reach the right beneficiaries, and for an open conversation about prioritising people over statistics – without ignoring the stability that economics provides.

Sri Lanka stands once again at the intersection of necessity and restraint. The nation must rebuild, and it must do so with empathy and speed. But it must also ensure that the price of today’s relief does not become tomorrow’s burden.

Prevention, reconstruction and the economy

Speaking to The Sunday Morning Business, Research Intelligence Unit (RIUnit) Chief Executive Officer (CEO) Roshan Madawela highlighted that reconstruction activity could help offset losses in the rebuilding efforts following Cyclone Ditwah.

“Sri Lanka’s current vulnerability to floods and landslides was the result of multiple factors, some beyond the country’s control and others well within it,” he stated.

Madawela pointed out that flooding was the world’s most significant environmental disaster, noting that, according to the Organisation for Economic Co-operation and Development (OECD), annual economic losses from floods amounted to around $ 40 billion globally.

The loss of lives from floods is largely preventable, in comparison to landslides. The RIUnit CEO noted that in many flood-prone areas, relatively low-cost mitigation measures could be implemented, while more comprehensive and expensive solutions were required only in certain locations.

He explained that land markets naturally adjusted to flood risk, with property prices reflecting the reality of exposure to flooding, a trend seen both in Sri Lanka and internationally. In some cases, waterfront properties offset flood risks through protective measures. Noting that residents in such areas were generally aware of the risks and prepared for periodic flooding, he added that with proper preparation, there was little justification for loss of life due to floods in the present day.

In contrast, Madawela described landslides as far more dangerous, highlighting that both floods and landslides were aggravated by longstanding failures to adhere to laws and regulations, as well as political interference. He observed that construction and settlement had been permitted in protected, environmentally sensitive, flood-prone, and mountainous areas over several decades, often driven by political considerations. According to him, these cumulative failures are now having serious consequences.

Referring to the hill country, Madawela warned that unchecked construction, including dense housing, sewage systems, and tunnelling, had weakened soil stability and created conditions for major disasters. He also noted weak enforcement of environmental safeguards, such as replanting requirements following deforestation, which had further added to environmental risks.

Thus, prior to focusing on costs, he noted the need to focus on prevention, giving greater attention to relocating communities in mountainous regions to safer, more stable plateau areas rather than slopes.

Commenting on the economic impact and about alarmist estimates, Madawela noted that post-tsunami reconstruction efforts had previously contributed significantly to economic activity. 

In his view, natural disasters do not automatically undermine long-term economic growth, as outcomes depend largely on how authorities manage reconstruction funding and aid inflows. Thus, he expressed optimism that funds would be utilised appropriately, given the incumbent Government’s focus on transparency and anti-corruption.

In Sri Lanka’s 2016 floods, overall, 58,925 houses were affected, of which 6,382 were destroyed and 52,543 were damaged, and over 85% of the affected houses were in the Colombo and Gampaha Districts. The total impact of the disaster amounted to Rs. 105 billion.

Madawela estimated that the economic cost of the current situation could be somewhat similar to this, possibly around 1% of GDP, noting that this was manageable. Reconstruction activity, especially in construction and related sectors, could help offset losses. However, he highlighted that flooding was likely to become more frequent, making long-term preparedness essential.

Furthermore, Madawela stressed that Sri Lanka already had strong laws, institutions, and regulations in place. The key weaknesses, he said, lay in enforcement, compliance, and the failure to penalise violations. Addressing these gaps will significantly improve the country’s ability to manage future disasters. 

He added that it would also be important to observe how recent landslides might affect property markets in highly affected areas, noting that towns requiring rebuilding presented opportunities to rebuild in a more resilient manner.