📈 WB: SL Must Accelerate Second-Gen Reforms for Durable Growth

World Bank Country Manager Gevorg Sargsyan stressed that while post-crisis stability has been broadly achieved, the current growth rate is too weak to ease fiscal pressure or reduce poverty, necessitating a shift to fast, investment-led growth. • Growth & Debt: The President's 7% GDP growth target (2026 Budget) is "absolutely achievable," but only with a decisive push on second-generation reforms. Public debt remains above 100% of GDP, with debt service absorbing nearly half of Government revenue. • Openness Deterioration: Trade and Investment as a share of GDP fell sharply from ~40% in 2000 to just ~20% in 2024. Reforms must focus on dismantling trade barriers, including tariff reduction and phasing out para-tariffs. • Productivity Crisis: Productivity has turned negative. This is critical in sectors like agriculture (e.g., coconut productivity is 20x higher in peer countries) and logistics (port ranking slipped from 6th/7th to 20th). • Private Capital & SOEs: A surge in private investment is essential due to limited fiscal space. Requires commercially-oriented reforms in SOEs (energy, transport, logistics), improved governance, and a modernized framework for land and labour. • Outlook: The World Bank reaffirms its commitment, stating the next chapter must focus on unlocking integrated, sustainable, and inclusive growth to ensure the benefits of recovery reach all Sri Lankans.