Colombo, October 2025 —
The World Bank’s latest Sri Lanka Development Update projects economic growth of 4.6% for 2025, but warns that the recovery remains uneven and vulnerable to external shocks. The report, titled “Resilience in Transition,” highlights that while inflation has moderated and reserves have improved, household income levels have not returned to pre-crisis conditions.
The World Bank emphasized that poverty remains above 25%, and nearly half of rural households continue to face food insecurity. Public debt, at nearly 91% of GDP, remains a persistent challenge despite successful external debt restructuring progress.
The report praised the government’s commitment to structural reforms, particularly in tax policy, state enterprise management, and anti-corruption measures. However, it urged greater attention to social safety nets and labour market inclusion, ensuring that growth benefits are widely shared.
From a macroeconomic standpoint, Sri Lanka’s challenge is transitioning from stabilization to sustained growth. Fiscal discipline has restored confidence, but productivity growth, private investment, and export diversification will define the next phase of recovery.
The World Bank’s analysis also stressed that private sector engagement and digital transformation can be key catalysts. Expanding e-governance, simplifying SME credit access, and fostering female workforce participation could add an estimated 1.2 percentage points to GDP growth annually by 2028.
The report concludes that Sri Lanka’s economy is entering a phase of cautious optimism — supported by macro stability and renewed confidence, yet constrained by inequality and structural inefficiencies that must be addressed to sustain momentum.
