Sri Lanka, although stable and growing as per most conventional standards, has to deal with the unfortunate and devastating effects of the tsunami that wreaked havoc in the subcontinent little over a year ago. Moreover, the political climate in Sri Lanka is extremely fragile at the moment with a new government that is yet to find its feet. The truce with the Tamil Tigers could end with the unleashing of a fresh spate of violence. This could lead to a slowdown of the economy reminiscent of the aftermath of the ethnic violence of the 1980s.