World Bank says Sri Lanka’s financial restoration stays incomplete, requires pressing reforms

Sri Lanka’s latest financial efficiency has been sturdy, however the restoration stays incomplete, the World Bank mentioned on Tuesday (October 7, 2025).

“With progress nonetheless beneath pre-crisis ranges and poverty considerably elevated, strengthening the restoration would require continued macroeconomic stability, pressing structural reforms, and extra environment friendly, better-targeted public spending,” it mentioned.

Sri Lanka’s financial system crashed in 2022 as a result of a foreign exchange disaster stemming from the COVID-19 pandemic and different flawed political and financial administration causes since 2019. The present turnaround was aided by the four-year IMF bailout of practically 3 billion USD pinned to a stringent reform regime.

“While Sri Lanka’s latest financial progress is encouraging, the restoration is uneven and incomplete,” mentioned David Sislen, World Bank Division Director for Maldives, Nepal, and Sri Lanka.

The World Bank tasks Sri Lanka’s financial system to develop by 4.6% in 2025 — supported by a modest rebound in business and regular progress in providers — earlier than slowing to three.5% in 2026.

“To construct a stronger, fairer financial system that advantages all households, in a fiscally constrained setting, Sri Lanka wants the personal sector to speculate and create jobs and be sure that each rupee of public cash is well-spent,” Sislen mentioned.

Despite sturdy latest progress, low inflation, and sturdy exterior inflows, meals costs stay excessive, and reserve accumulation has slowed.

Sri Lanka’s financial output remains to be beneath 2018 ranges, and though poverty is declining, it stays twice as excessive as in 2019.

To help long-term progress and cut back poverty amid fiscal constraints, the financial institution requires a broad package deal of reforms geared toward enabling personal sector-led progress.

Key priorities embrace easing boundaries to commerce and funding, bettering the enterprise setting, and modernising tax administration and rules associated to land and labour markets.

More than 80% of presidency spending is exhausted in public sector salaries, welfare applications, and curiosity funds, leaving little scope for growth-oriented investments in infrastructure, schooling, and well being.