Sri Lanka’s efforts to revive its tourism industry face renewed scrutiny as policy instability and bureaucratic hurdles threaten to undermine a US$100 million Asian Development Bank (ADB) assistance program designed to transform the sector into a sustainable growth engine.
The ADB’s Sustainable Tourism Sector Development Program a key component of its ongoing support to Sri Lanka—aims to stimulate investment and innovation by developing two major tourism hubs in Dambulla-Sigiriya and Trincomalee. The initiative will channel US$70 million in concessional loans and US$30 million in regular loans toward improving infrastructure, enhancing governance, and supporting diversification into emerging tourism segments such as eco, marine, and cultural tourism.
According to ADB Country Director Takafumi Kadono, the project seeks to modernize Sri Lanka’s tourism ecosystem through digitalization, skills development, and improved policy frameworks. “Tourism can be a catalyst for inclusive and sustainable growth,” Kadono said. “But lasting success depends on stability, good governance, and effective institutional coordination.”
While the ADB’s intervention has been widely welcomed, industry stakeholders are less optimistic about the government’s ability to deliver consistent and transparent policies. Several analysts warn that Sri Lanka’s recurring policy flip-flops, particularly under the new JVP-led National People’s Power (NPP) administration, risk deterring investors and delaying project implementation.
Data from the Sri Lanka Tourism Development Authority (SLTDA) show that the country recorded 1.5 million tourist arrivals in the first nine months of 2024, nearly matching pre-pandemic levels. Yet, foreign exchange earnings remain subdued at around US$2 billion, less than half the US$4.4 billion achieved in 2018.
Experts attribute this underperformance to frequent regulatory shifts, including sudden changes to visa policies, inconsistent taxation on hotel stays, and restrictive import rules that affect tourism operations. The absence of a coherent destination branding strategy and continued delays in finalizing tourism zoning regulations have also left Sri Lanka lagging behind regional competitors such as the Maldives and Thailand, both of which have successfully aligned policy, marketing, and infrastructure to attract high-value travelers.
Meanwhile, the government’s emphasis on community-based tourism under its socialist policy framework has yet to show tangible results. Critics argue that over-centralization and red tape continue to delay implementation, discouraging private sector participation and innovation.
Kadono cautioned that while financial support can act as a springboard, its effectiveness depends on strong institutional discipline and policy consistency. “Without a clear and sustained roadmap, Sri Lanka risks repeating past mistakes where ambitious tourism reforms faltered amid political turbulence,” he warned.
As global travel rebounds, Sri Lanka stands at a crossroads offered a lifeline by ADB’s financial backing but challenged by its own governance lapses. Whether the country can convert external support into genuine, long-term revival will depend on its ability to prioritize stability, investor confidence, and a unified vision for sustainable tourism growth.
