The World Bank has released its latest assessment of Sri Lanka’s economy, commending the government for achieving steady recovery while emphasizing that critical challenges remain on the road to sustainable growth.
According to the World Bank’s 2025 Sri Lanka Economic Update, the nation has made commendable strides in reducing inflation from the record highs of over 70% in 2022 to below 6% by mid-2025. Fiscal discipline, enhanced revenue collection, and targeted social spending have contributed to macroeconomic stabilization.
The report also acknowledges significant improvements in the external sector, with export growth in apparel, IT services, and agriculture sectors contributing to a modest GDP growth rate projected between 3.5% and 4% for 2025. Tourism has continued to play a vital role, with arrivals surpassing 2.4 million during the first three quarters of the year.
However, the World Bank cautioned that Sri Lanka must continue its debt restructuring and strengthen governance transparency to maintain the reform momentum. It also urged the country to accelerate state-owned enterprise (SOE) reforms and enhance social protection measures to safeguard low-income households.
The institution praised Sri Lanka’s efforts to restore confidence in its financial institutions, but warned that public trust and inclusive growth must remain policy priorities to prevent social inequalities from widening as the economy recovers.
Analytical Insight
Sri Lanka’s progress since the 2022 crisis demonstrates resilience and reform commitment. Yet, its recovery will only be sustainable if deep structural reforms are institutionalized. The next 12–18 months will be pivotal as the nation seeks to balance fiscal discipline with equitable economic development.
