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Tuesday October 20th, 2026

South Asia’s smaller countries have a principled stand on Ukraine war

ECONOMYNEXT – It’s nearly a hundred days since Russia invaded Ukraine and escalated a simmering conflict limited to the Eastern part of the country into a full-scale war that involves nearly two hundred thousand Russian troops.
The conflict has impacted Europe and the West deeply, sending oil prices and subsequently the cost of other commodities soaring and fears that the world order itself will be deeply affected.

South Asia’s response to the war is also being discussed widely and on May 31, a webinar organized by the Friedrich Neumann Foundation for Freedom brought representatives from the smaller nations on the subcontinent to express their views.

Entitled Ukraine Crisis: Assessing South Asia’s response, the discussion was moderated by Pramit Pal Chaudhuri Senior Adviser at the Rhodium Group and Foreign Editor, Hindustan Times.

Joining the discussion as panellists were Dr Abdul Hannan Waheed, Editor and Writer, Maldives Business Standard, Gopilal Acharya, Journalist and founder of the “Journalist” in Bhutan and Major General (Retd) Binoj Basnyat, a Strategic Analyst of Nepal.

Addressing participants at the beginning of the webinar, Dr. Marcus Faber, a member of the German Federal Parliament (Bundestag) who also sits on the Parliament’s Defense Committee, emphasized it was important for Asian nations to be engaged in the issue.

“We should do everything to stop Russia and do everything to protect the democracy that is under attack here because the result of the conflict will affect the rest of the world. If the attack is successful against democracy, then there will be other dictatorships willing to attack other democracies,” Dr. Faber said.

He called on Asian nations to join the condemnation of Russia because “we need the rule of law to prevail. Otherwise, this kind of action can happen in Asia”.

The South Asian region remains divided on the Ukraine issue.

These divisions came out into the open in the United Nations General Assembly on March 2 when all the smaller nations in the region except for Sri Lanka, supported the resolution condemning Russia for invading Ukraine while the bigger countries abstained.

Afghanistan took a neutral position but voted in favor of the resolution condemning Russia. The reason, as Chaudhuri explained was that the neutral position was adopted by the Taliban government in Kabul and the vote condemning Russia came from the pro-Western Islamic Republic, the government in exile.

Bangladesh took a neutral position and also abstained from voting. Bhutan and Nepal criticized Russia and voted in favour of the resolution. The Maldives took a neutral position but voted in favor of condemning the invasion.

Like Bangladesh, Sri Lanka was neutral and abstained from voting. This was the same position that India took, but New Delhi issued a statement saying it supports the sovereignty and integrity of countries without mentioning Ukraine.

Pakistan also abstained from voting, according to the United Nations website.
Moderator Chaudhuri commented that it appeared the smaller countries “voted on principle while the bigger countries voted on interests.”

In a previous FNF webinar on Asia’s engagement in the Russian –Ukrainian conflict, panellists from India, Bangladesh, and Sri Lanka pointed to their close historical ties with the former Soviet Union as reasons why they could not condemn Moscow. Both India and Bangladesh have close ties to Russia and the Soviets helped India and Bangladesh during the latter’s war of liberation in 1971.

India continues to have military cooperation with Russia. Sri Lanka too is constrained in condemning Russia, as the latter is one of the biggest buyers of Sri Lanka Tea and also attracts a significant number of tourists from that country.

Acharya, a Bhutanese journalist, agreed that the Russian invasion of Ukraine does pose a threat to the rest of the world. “Ukraine is a democracy, and this is unacceptable to the rest of the world.”

He also said that the political parties in Bhutan all agreed that their country should condemn the invasion.

“We are one of the smallest countries in the region and have to live next to China and India,” he pointed out.

Nepal is also in a similar situation. Though more populated than Sri Lanka, Nepal has also to deal with the two giant neighbours. Its position was the same as Bhutan with Maj. Gen.

Basnyat said Nepal had to consider “various disputations” between India and China and the “annexation of Tibet and Sikkim.” He also said that with regards to border issues and relationships with the neighbours the political parties in Parliament have reached a consensus and supported the anti-Russia vote.

In the case of the Maldives, the government had realized that even to be neutral and abstain from voting would be supporting the invasion. Dr Hannan explained that there was a consensus to condemn the invasion.

“Maldives is trying to balance the relationships. Although the two main political parties differ in their international stands, for instance, the current government sways in the direction of India and democracy, and the Opposition PPM leans towards China and therefore Russia.”

The Maldives is heavily dependent on Russian tourists and there are mixed sentiments about the war on Ukraine, says Dr Hannan. “This year the highest number of tourists, some 15.5 percent were from Russia.” At the time of the invasion, there were 8,000 Russian tourists and over 800 Ukrainians in the Maldives.

Maldivians, he says have a good opinion of Russians, adding that those who visit the Maldives on vacation are not politically involved.

Because the Russian state-run English language TV channel RT is broadcast in the Maldives there are many Maldivians who believe in the justification of the invasion Dr Hannan observed. “They have believed all the conspiracy theories,” presented on RT he said.

Acharya adds that the issues of small states living among the “rising giants of Asia, India and China is a challenge. The vulnerability of what Ukraine is facing is something we understand.

We are developing ‘Gross National Happiness’ as soft power, as a thought-leader despite its small size. But the main issue we talk about in Bhutan is the vulnerability of small states because nothing seems to be sure. You have an assurance today but that is thrown out the window tomorrow.”

He also pointed out that Bhutan does not have relationships with the big five Security Council members. Bhutan’s main relationship is with India. “This time we broke ranks with India and voted for the resolution. But as long as India can look after our interests, we should be ok.”

Chaudhuri also directed the conversation toward the behaviour of social media with regard to the conflict. Noting that Russia and Ukraine as well as the West were utilizing social media for their propaganda campaigns, he stated that Ukraine’s efforts, in particular, have been impactful.

“The number of videos it has laid out and the way their soldiers have been interviewed is impressive.”
Asked what the reaction in Bhutan is to social media around the conflict, Acharya said that it is “providing many different perspectives.”

He warned that people should be conscious when consuming social media.

“Ukraine has been very successful at projecting itself as a victim of an unnecessary invasion and seeking out humanitarian and military assistance.” He also noted that Ukrainian President Volodymyr Zelensky appears to be using social media very well.

Maj Gen Bisnyat echoed the sentiments of the smaller nations, pointing out that the larger countries in the region had failed to seek common ground on the issue, through regional bodies such as the South Asian Association for Regional Cooperation (SAARC).

He would like to see these Organisations put to good use, in helping nations in the region to negotiate with each other for the free flow of commodities and other supplies that may be impacted by the conflict in Europe. “Why don’t we act as South Asians and address common problems and get common answers,” he asked.

However, other panellists were of the opinion that SAARC was an ineffectual organisation with little consensus on major issues, with Acharya saying that he does not see the regional body taking a common stand. “SAARC is a weak organisation and has not taken a courageous stand since its inception,” he said. Unfortunately, South Asia will remain divided.

Panelists were agreed that South Asian regions will suffer severe food shortages if the European conflict drags on.
Russia and Ukraine are major suppliers of food and fertilizer. Fuel shortages and thereby rising fuel prices globally will impact these smaller and relatively poorer countries. The consensus was that the faster the war is brought to an end the better it will be for this region. (Colombo/Jun08/2022)

Sri Lanka’s Sampath Bank, David Pieris Automobiles launch vehicle financing partnership

ECONOMYNEXT – Sri Lanka’s Sampath Bank and David Pieris Automobiles are partnering to offer customers preferential vehicle financing and ownership benefits.

Under the collaboration, customers purchasing vehicles through David Pieris Automobiles will receive a 0.5 percentage point reduction on published vehicle lease interest rates, subject to terms and conditions.

They will also have access to vehicle insurance premium loans with no interest if settled within two months, along with Sampath Bank credit cards that carry no joining fee and offer 0% interest instalment plans for insurance payments for up to 12 months.

David Pieris Automobiles, the four-wheeler sales arm of the David Pieris Group and distributor of GWM brands including HAVAL, TANK and ORA, as well as BAIC models, will provide additional customer benefits including free vehicle registration and a third labour-free vehicle service.

The two companies said the partnership reflects a shared commitment to meeting evolving mobility needs through accessible financing and automotive solutions. (Colombo/Oct20/2026)

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Sri Lanka’s Access Engineering drops S Asia logistics hub project, expects Rs1.45bn recovery

ECONOMYNEXT — Sri Lanka’s Access Engineering PLC said shareholders have agreed not to proceed with the South Asia Commercial and Logistics Hub project, following an initial corporate disclosure made in April 2023.

The parties have agreed to enter into a settlement agreement for the orderly termination of the project and all related agreements.

Under the planned settlement arrangements, Access Engineering anticipates recovering approximately 1.453 billion rupees from its total investment of roughly 1.762 billion rupees.

“The decision was made in view of changes in external circumstances, including adjustments to the project’s implementation environment and timetable, together with the respective commercial considerations of the parties,” Managing Director Rohana Fernando said in a filing to the Colombo Stock Exchange.

Access Engineering holds a 15 percent shareholding in South Asia Commercial and Logistics Hub Limited.

Under the settlement terms, the company expects to receive 3.286 million US dollars (equivalent to approximately 1.087 billion rupees) as its proportionate share of the settlement refund.

It will also receive approximately 365 million rupees representing its share of available distributable funds, based on an indicative exchange rate of 331 rupees per US dollar.

In its audited consolidated financial statements for the year ended March 31, 2026, the group had already recognized its share of losses amounting to approximately 387 million rupees, leaving the carrying value of the investment at roughly 1.38 billion rupees.

“Based on the anticipated settlement proceeds and the carrying value of the investment, no further material financial loss is presently anticipated in the Group’s consolidated financial statements,” Fernando said.

However, because the investment is carried at cost in the company’s separate financial statements, Access Engineering expects to recognize a company-level loss of approximately 310 million rupees.

The company noted that the final figures remain subject to the exchange rates applicable on actual transaction or payment dates, final settlement arrangements, and applicable accounting adjustments. (Colombo/Oct20/2026)

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Sri Lanka rupee weaker at 331.75/90 to US dollar spot, bond yields higher

ECONOMYNEXT – Sri Lanka’s rupee was quoted at 331.75/90 to the US dollar in the spot market on Tuesday, weaker from 331.60/70 the previous day, while bond yields were quoted higher, dealers said.

A bond maturing on 15.09.2029 was quoted at 11.10/30 percent, up from 11.10/25 percent.

A bond maturing on 01.08.2030 was quoted at 11.65/70 percent, up from 11.50/60 percent.

A bond maturing on 01.12.2031 was quoted at 11.90/12.00 percent.

A bond maturing on 15.01.2033 was quoted at 12.25/35 percent, up from 12.25/30 percent.

A bond maturing on 15.06.2034 was quoted at 12.50/55 percent, up from 12.40/50 percent.

The telegraphic transfer rate for the dollar was 327.10 buying, 336.10 selling; the euro was 364.3987 buying, 378.1795 selling; pound was 434.5676 buying, 448.6760 selling.

On the Colombo Stock Exchange the All Share Price Index was down 0.09 percent, or 18.32 points, at 20,041; while the S&P SL20 was broadly unchanged at 5,701. (Colombo/Oct20/2026)

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Global financial markets face rising risks from AI, bond yields, and cyberattacks: IMF

Financial markets have remained resilient amid solid economic growth and strong corporate earnings, while financial conditions have been relatively accommodative. However, there is no room for complacency.

Three key risks have been increasing, each with the potential for broader implications: an artificial intelligence-driven market correction, a sharper rise in sovereign bond yields, and cyberattacks.

Vulnerabilities beneath the surface could determine how damaging the manifestation of these risks would be, as we detail in the latest Global Financial Stability Report. An AI market correction could trigger broad deleveraging across asset classes. A bond yield shock could reprice assets and reduce the collateral value of bonds in financial transactions. A cyberattack could disrupt critical operations and weaken confidence. High borrowing, scarce liquidity, and tighter links across markets could amplify the impact into broader financial stress.

Heavy reliance on AI

AI has become an important support for the global economy and financial markets, as discussed in the World Economic Outlook. Investment in data centers, semiconductors, and related infrastructure has spurred economic activity, while companies driving the AI boom have delivered exceptional earnings growth. But faltering AI investment and profitability could challenge optimistic expectations and trigger a correction in asset prices linked to the AI industry.

Growing leverage could be a catalyst for such a correction. Hyperscalers, as the largest data center operators are known, are borrowing more and more, while investors have been leveraging to invest in AI stocks. Circular financing arrangements in the AI sector, involving equity and debt flows between AI firms, suggest that stress at key companies receiving investment could lower revenue forecasts and investment valuations, which in turn would weaken the value of the accumulated debt in those deals. Our review of 14 such transactions since 2023 found about $300 billion in equity investments and $650 billion in debt, in exchange for $1.4 trillion in future revenue commitments.

Government debt risks

Sovereign bond yields have risen amid renewed inflation pressures from higher energy prices, fiscal concerns, and, in some cases, stronger-than-expected economic growth. It may be the case that bond yields are moving back toward the levels seen before the global financial crisis, when growth and inflation were higher than in the 2010s. At the same time, risks of adverse feedback loops related to higher fiscal imbalances and leveraged trades in bond markets are increasing. In addition, as central banks have been reducing their balance sheets, greater reliance on price-sensitive investors could contribute to further yield volatility.

As government bonds underpin the global financial system, the consequences of higher sovereign yields could extend well beyond public debt. Higher yields could further raise discount rates and depress valuations across other assets, including those that are AI-related, while reducing the value of bonds used as collateral.

Cyberattacks

As finance becomes more digital and interconnected, cyber disruptions have emerged as a growing source of systemic risk. A major incident could disrupt payments, trading, access to deposits, or other critical financial services. The danger is particularly acute if an attack affects a major financial institution, payment system, cloud provider, or software platform, allowing disruption to spread through an increasingly interconnected financial system.

Importantly, cyber threats can be hard to contain. In more than 70 percent of reported cases so far this year, software providers had almost no time to patch vulnerabilities before attackers exploited them. That’s more than double the share in 2021, when providers typically had close to 300 days to fix vulnerabilities. Frontier AI models could accelerate both attacks and defenses, increasing the importance of cyber resilience, incident reporting, crisis preparedness, and oversight of critical third-party providers.

Financial fault lines

Underlying vulnerabilities could amplify the impact of these three risks into systemic events.

Although global banks, the core of the financial system, remain resilient overall under our adverse stress scenario, there could be weak links. Banks with 22 percent of global banking assets would emerge with post-stress capital ratios below regulatory limits, an increase from 18 percent a year ago. Moreover, the links of such banks with nonbank financial intermediaries are deepening, creating additional channels for transmitting stress.

Beyond banking, pension funds and insurers have steadily increased allocations to illiquid assets and derivatives, while relying more heavily on the same asset managers. This increases the risk that at a time of stress, they could face sudden liquidity needs through margin calls and could react in similar ways—for example by selling the same assets—amplifying market moves. Some of these institutions also hold illiquid private credit, another potential amplification channel.

At the same time, as borrowers have become more leveraged, some direct-lending funds have committed to provide funding on demand. If financial conditions tighten, borrowers could draw on those facilities just as the funds that provide them could be facing their own liquidity pressures. Such dynamics could further reduce credit to companies that need it most, with consequences for the broader economy.

In emerging and developing economies, bond yields have also risen, although their spreads compared with their advanced economy peers remain fairly compressed. However, recent global shocks have diminished buffers, thereby increasing external vulnerabilities and reducing their ability to absorb stress.

Policies to safeguard

With government debt high, inflation pressures re-emerging, and higher borrowing costs, policymakers have much less room to support the economy following shocks than in the past.

We see three priorities for action:

-Debt needs to be put on a sustainable path.
– Leverage and liquidity mismatches in AI, private credit, and other nonbank financial sectors should be limited, including through sectoral capital and concentration requirements on banks’ exposures to these sectors.
– Cyber defense capabilities need to be strengthened, for example through better incident reporting and resilience testing among financial institutions.
Emerging and developing economies should also rebuild buffers while financial conditions remain accommodative. Proactive policies are the best way to prepare as risks are rising.

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Sri Lanka rupee closes weaker at 331.60/70 to US dollar spot, bond yields higher

ECONOMYNEXT – Sri Lanka’s rupee closed at 331.60/770 to the US dollar in the spot market on Monday, weaker from 331.25/35 the previous day, while bond yields closed higher, dealers said.

A bond maturing on 15.09.2029 closed at 11.10/25 percent, up from 11.05/15 percent.

A bond maturing on 01.08.2030 closed at 11.50/60 percent, up from 11.40/50 percent.

A bond maturing on 15.10.2030 closed at 11.65/75 percent, up from 11.50/55 percent.

A bond maturing on 01.02.2031 closed at 11.75/80 percent, up from 11.55/65 percent.

A bond maturing on 15.12.2032 closed at 11.90/12.10 percent, up from 11.80/90 percent.

A bond maturing on 15.01.2033 closed at 12.25/30 percent, up from 11.95/12.05 percent.

A bond maturing on 15.06.2034 closed at 12.40/50 percent, up from 12.20/25 percent. (Colombo/Oct19/2026)

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Sri Lanka shares close down on Monday; ASPI falls 0.62-pct

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed down on Monday, CSE data showed, with the benchmark All Share Price Index falling 0.62 percent.

The ASPI was down 125.63 points at 20,059.42, while the more liquid S&P SL20 was down 0.51 percent, or 29.36 points, at 5,709.47.

Raynal Wickremeratne, Head of Research and Strategy at NDB Securities, noted that market turnover remained low, with local sentiment reflecting the recent volatility and declines across regional Asian markets.

Positive contributors to the ASPI were Watawala Plantations (up 2.43 percent at 46.40 rupees), Richard Pieris and Company (up 1.54 percent at 26.40 rupees), Ceylon Cold Stores (up 0.62 percent at 122.00 rupees), and Commercial Bank of Ceylon (up 0.13 percent at 198.25 rupees).

Dialog Axiata (down 2.27 percent at 43.00 rupees), Overseas Realty (Ceylon) (down 2.00 percent at 49.00 rupees), John Keells Holdings (down 1.67 percent at 17.70 rupees), Hemas Holdings (down 1.29 percent at 30.50 rupees), and Hatton National Bank (down 0.79 percent at 375.00 rupees) were top negative contributors.

Market turnover was 680.32 million rupees. The banking sector led turnover with 188.71 million rupees, followed by capital goods with 177.78 million rupees.

Crossings were recorded in Seylan Bank for 98 million rupees and John Keells Holdings for 26 million rupees. (Colombo/Oct19/2026)

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