By: Staff Writer
April 10, Colombo (LNW): Sri Lanka is showing signs of steady economic recovery in 2025, following the deep crisis that gripped the nation in recent years. Key economic indicators reflect growing resilience. Inflation has remained moderate compared to past highs, foreign reserves have seen gradual improvement, and the country is on track with its debt restructuring and fiscal reform goals. Increased tourist arrivals and healthy remittance inflows continue to support foreign exchange earnings. As structural reforms take root, Sri Lanka is transitioning from stabilization to a more sustainable growth model, signaling cautious optimism for the years ahead.
According to the Asian Development Outlook (ADO) April 2025, released by the Asian Development Bank (ADB), Sri Lanka’s economy is expected to grow by 3.9% in 2025 and 3.4% in 2026. This follows a notable rebound in 2024, fueled by broad-based sectoral recovery that began in the latter part of 2023. The momentum continued through 2024, with inflation easing significantly due to cuts in energy prices, rising private sector credit, and steady improvements in foreign reserves. The tourism sector and remittances have also remained strong contributors.
ADB anticipates that Sri Lanka’s recovery will persist over the next two years. As uncertainties related to national elections and debt restructuring begin to diminish, investor sentiment is expected to improve, leading to greater private investment. However, consumer demand may remain soft due to expected inflationary pressures.
Several risks could impact the outlook. These include global trade uncertainties, particularly the recently announced U.S. tariffs on Sri Lankan imports, potential setbacks in the reform process, and inconsistencies in macroeconomic policy. The ADB notes that the baseline growth projections were made before the U.S. announced new tariffs on April 2, and as such, the impact of these new measures is not fully reflected in the forecasts.
“Difficult reforms are beginning to yield visible results following the recent economic crisis,” said ADB Country Director for Sri Lanka, Takafumi Kadono. “It is encouraging to see stabilization and movement toward long-term debt sustainability. Continued reform is critical to building resilience and reviving growth.”
While commendable progress has been made in areas such as fiscal consolidation and restructuring debt, the country still faces high debt vulnerability. The public debt-to-GDP ratio is not expected to fall below 95% until 2032. Building robust external and fiscal buffers, along with structural reforms to enhance trade and private sector-led growth, remains essential.
ADB continues to support Sri Lanka through financial assistance and strategic partnerships that promote inclusive, sustainable development across the region.
