📈 IPS Blueprint: Sectoral Paths for Sri Lanka’s Durable Growth

The Institute of Policy Studies (IPS) outlines policy priorities to achieve a 7% medium-term growth goal and strengthen economic resilience against internal and external shocks. • Macro & Fiscal Foundations • Revenue recovered from 8.2% of GDP (2022) to 16.6% (2025), but remains dominated by indirect taxes (40:60 direct-to-indirect ratio). • Public investment dropped from 5% to 3% of GDP during fiscal adjustments. • Recommends tariff simplification, removing para-tariffs, and establishing trade adjustment support for MSMEs. • Trade & Export Performance • 95% of export growth since 2008 came from existing products; only 43 of nearly 1,000 new products proved competitive. • Emphasizes diversifying away from reliance on non-reciprocal access like GSP+ toward reciprocal trade deals. • Human Capital & Labour Dynamics • Tertiary qualification rate among knowledge workers stands at 34.1%. • Informal sector accounts for 66.5% of total employment (2024), with 60% of informal wage workers in small firms (<5 employees). • Senior population (60+) to increase from 12.4% (2012) to 23.1% by 2042, requiring a transition to a active silver economy. • Agriculture & Sectoral Efficiency • Agriculture Total Factor Productivity grown by just 0.3% annually over the last decade (vs 1.6% South Asian average). • Focus needed on agro-processing, post-harvest modernization, and SL-GAP certifications. • Regional & Infrastructure Disparities • Western Province generates 42% of GDP with an adjusted urban density of ~61%. • Calls for congestion pricing in Colombo and developing secondary clusters in Southern Province (Hambantota, Mirijjawela). • Priorities include ring-fencing transmission grid investments for the renewable energy transition.