Sri Lanka’s estimated poverty (share of the population living on less than $3.65 a day) remains stubbornly high, affecting as much as a quarter of the population in 2024, and twice as high as in 2021. The reversal in poverty reduction gains during the crisis has taken Sri Lanka back to its high poverty levels of the early 2000s, finds a new study by the Centre for Poverty Analysis(CEPA).
The report, launched on Tuesday in Colombo, says: The economy has stabilised remarkably well since weathering its worst economic crisis since Independence, but there are substantial risks of a relapse. The country now needs to continue with macroeconomic stabilisation and implement a range of growth policies, with a new focus on state capacity.
The report, titled ‘Sustaining Transformative Growth in Sri Lanka 2025–2030’, offers a bold roadmap for Sri Lanka to achieve sustainable and inclusive economic growth over the coming five years. Authored by an Independent Growth Study Group, under the auspices of ODI Global and the CEPA, the report provides critical policy recommendations for navigating the country’s complex economic landscape as it emerges from its worst economic crisis since independence.
Developed by a team of nine leading experts, with extensive experience across public, private, and international sectors, the report highlights the significant progress made in stabilising the Sri Lankan economy, including renewed growth and reduced inflation. However, it stresses that the persistent challenge of high poverty levels requires a focus on economic transformation with structural reforms and targeted sectoral policies to mitigate future risks and unlock the nation’s vast potential.
Dr Ganeshan Wignaraja, Visiting Senior Fellow at ODI Global and Convenor of the Independent Growth Study Group, said: “Sri Lanka has shown remarkable resilience in overcoming recent economic hardship, but the journey towards prosperity requires more than resilience – it demands bold action. This report provides a crucial framework, not just for consolidating the hard-won gains of stabilisation, but for igniting truly transformative growth that uplifts all Sri Lankans. The opportunity is here, and we must act decisively to create a more inclusive and resilient economy.”
The study identifies six key policy areas as crucial for achieving sustainable growth: maintaining macroeconomic stability, integrating into global supply chains, improving factor markets, implementing targeted sectoral policies, reducing poverty and building political consensus. It also highlights key sectors poised for growth, including tourism, the digital economy, niche manufacturing and agriculture, driving the economic transformation of Sri Lanka in the future.
Prof. Sirimal Abeyratne, Executive Director of CEPA and a co-author of the report, emphasised the critical role of trade in this transformation: “Sri Lanka’s historical under-performance in exports is directly linked to a persistent anti-export bias and cumbersome business regulations. Our findings underscore that strategically opening up to global trade and rigorously streamlining business procedures are not just options, but essential accelerators to boost exports, stimulate investment and unleash the full potential of Sri Lankan businesses on the international stage.”
Prof. Dirk Willem te Velde, Director of the International Economic Development Group at ODI Global, said: “In today’s volatile global economy, Sri Lanka’s experience serves as a powerful lesson for recovery from deep economic crisis, setting an example for other emerging economies facing similar challenges. Our study argues how targeted policies for trade and production, innovation and digital economy, and governance can transform the country’s economic landscape and avoid further macro-economic crises. This report is a call to action for all stakeholders – government, business, civil society and citizens alike – to work together towards a shared vision of a prosperous and transformed Sri Lanka.”
The report urges a concerted effort to leverage Sri Lanka’s strategic location and build on existing production capabilities to drive growth and reduce poverty. It emphasises the importance of strategic engagement with global and regional supply chains and the digital economy to boost exports and attract foreign investment.