📈 Sri Lanka’s Economic Reality Check: Beyond Stabilisation

Following the 2022 crisis, Sri Lanka has achieved remarkable macroeconomic stability. However, experts warn that this is not yet a full recovery, as deep-seated structural issues hinder long-term growth. • Key Economic Challenges • Poverty remains above 20%, with only one-third of youth expected to secure formal employment. • FDI inflows remain stuck at ~1% of GDP, significantly trailing regional peers. • Exports have declined from 40% to 20% of GDP over two decades. • Productivity gaps persist in agriculture and construction, while rigid labor markets continue to exclude women. • Strategic Path Forward • The World Bank Group (WBG) has launched a 2026-2030 Partnership Framework, pledging US$ 2 Bn in financing and seeking to mobilize US$ 1.2 Bn in private capital. • Focus areas include: ports & logistics, energy, tourism, and agribusiness. • Business leaders emphasize that ease of doing business, predictability, and economy-wide reforms are more critical for growth than sector-specific incentives. • Industrial Reform • The Industrial Development Board (IDB) is undergoing its first legal overhaul in 57 years. • The Ministry of Industries has initiated a six-month drive to rewrite SME policy and restructure institutions to better support enterprise scaling and strategic management capabilities. The consensus remains clear: sustained growth requires moving beyond crisis management to fixing structural inefficiencies in investment, trade, and productivity.