October 16, Colombo (LNW): Sri Lanka’s economic recovery is showing encouraging signs of resilience, with stronger-than-expected GDP growth of 4.9 per cent recorded in the first half of 2025. This rebound, supported by improving macroeconomic conditions and a more stable policy environment, is fuelling optimism. Yet, questions remain about the long-term sustainability of this momentum and the structural reforms needed to support it.
The Institute of Policy Studies (IPS), in its flagship publication Sri Lanka: State of the Economy 2025, explores this critical juncture in the country’s post-crisis path, highlighting how gains in productivity and economic efficiency will be essential to transforming the current cyclical upswing into durable, broad-based growth.
While sound monetary and fiscal policies have provided much-needed stability, deeper reforms—particularly in land use, labour regulations, and market access—are seen as central to unlocking further economic potential. However, implementing such changes is politically sensitive and often constrained by short-term socio-economic demands, especially in a nation still grappling with the aftershocks of a financial crisis.
Against this backdrop, the IPS report identifies technology and digital transformation as pivotal in accelerating productivity improvements across sectors. Although national computer literacy remains relatively low at 39 per cent, with stark inequalities such as a 17.9 per cent rate in estate communities, the potential for digital technologies to drive inclusive development is considerable.
Digitalisation offers practical, cost-effective pathways to bridge service gaps in education, health, agriculture, and transport. For example, expanding internet access and digital tools in underserved schools could help reduce disparities in learning outcomes. Encouragingly, nearly 42 per cent of Sri Lanka’s lowest-income earners already use digital payments—an indication that digital adoption is growing at the grassroots level.
This trend opens up opportunities to enhance the country’s e-commerce landscape, modernise public services, and extend critical support to farmers through scalable digital extension services. Moreover, improving digital infrastructure can help Sri Lankan exporters adapt to global regulatory shifts, such as traceability requirements and supply chain transparency, thereby improving competitiveness.
Ultimately, the IPS underscores that while policy reform remains a complex and gradual process, embracing digital innovation can deliver measurable gains in the near term. With the right investments in infrastructure, digital literacy, and regulatory support, Sri Lanka can lay the foundation for a more resilient, inclusive, and future-ready economy.
