Sri Lanka is an upper-middle-income country again. However, by the World Bank’s poverty line for that group, 61% of its people are still poor.
The Bank’s latest Sri Lanka Development Update, released in Colombo in October, finds an economy back at its pre-crisis size and expects growth to slow on current policies, leaving households behind.
“Sri Lanka’s story for the last four years has been one of recovery. The story for the next four years should be one of opportunity,” said Stephan Massing, Acting Country Manager of the World Bank Group in Sri Lanka and the Maldives, who set out what that would take.
Sri Lanka returned to upper-middle-income status in July 2026. Does that cost it access to the World Bank’s cheapest loans?
Not on its own. Sri Lanka only narrowly crossed the income threshold, and income is only one test. The other is whether a country can borrow normally from markets. Sri Lanka lost that ability in the crisis, so in 2022 it moved from our standard lending, at close to market rates, to the International Development Association (IDA), our fund for the cheapest loans and grants. It still has that access.
Real labour incomes, earnings from work after inflation, fell more than 40% between 2019 and 2023, and twofifths of Sri Lankans remain poor or at risk of poverty. Why aren’t families feeling the recovery?
Because the recovery has so far happened at the macroeconomic level and has not yet fully reached ordinary families.
Poverty is 16.9%, against 11.5% before the crisis. Real wages are still about 12% below their 2019 level, and fewer people are working or looking for work: the labour force participation rate was 49.4% in 2025, against 52.3% in 2019. Then came new shocks. Cyclone Ditwah hit many families, and in early 2026 energy costs from the Middle East conflict pushed up inflation and stalled real incomes again.
Cash support helps vulnerable households get by. What helps them earn their own way?
Interventions that lift people up in a more sustainable way. We are working with the government on economic inclusion projects that give the most vulnerable the means to start a business, along with financial literacy so they can access credit. Agriculture is one of the key pathways.
In 2024 and 2025, growth averaged about 5%. On current policies, the World Bank expects growth to slow to 4.4% in 2026 and 4.2% in 2027. The report calls for transformation. What would that look like?
A new phase of growth, driven by private investment, exports, and productivity, meaning the amount each worker produces.
The ultimate objective is jobs and growth, with jobs that reach people across the country, including women, young people, and those in rural areas.