The World Bank has cautioned that Sri Lanka’s economic recovery remains fragile and could lose momentum without swift and sustained reforms. In its latest Sri Lanka Development Update released in Colombo, the Bank said, economic growth is expected to reach 4.6 percent in 2025 before moderating to 3.5 percent in 2026.

 

 

The report highlighted that while revenues have strengthened and reserves remain stable, the recovery is still uneven. Poverty levels are estimated at around 22 percent, with another 10 percent of the population living just above the poverty line.

 

 

The World Bank emphasised that fiscal space is limited, with about 80 percent of government spending tied to salaries, welfare, and interest payments. It said the focus must shift to improving efficiency in public expenditure and creating room for investment in infrastructure, education, and health. The Bank warned that without reforms in trade, taxation, investment, and job creation, Sri Lanka’s progress could stall and growth would remain unsustainable. President Anura Kumara Dissanayake will present the Budget Speech on 7th November.