The Central Bank noted that between 2015 and 2018, the country experienced moderate economic growth. However, rising government expenditure led to a budget deficit exceeding standard levels, ranging between 5% and 7%.
From 2019 to 2022, Sri Lanka’s economy faced a severe downturn, driven by policy and management challenges. The foreign exchange shortage that emerged in 2021 escalated into a full-blown economic crisis by 2022. Declining GDP, a widening budget deficit, currency depreciation, and shortages of fuel and food contributed to soaring inflation. During this period, the government also failed to meet its foreign debt obligations.
In response, Sri Lanka initiated a recovery programme with the International Monetary Fund (IMF) in 2023, continuing through 2025. Under this framework, the government implemented several fiscal management reforms, which have contributed to improving economic conditions.
The Central Bank reports that the budget deficit has now been reduced from 8% to 2%, while GDP growth has returned to positive territory. Maintaining a 5% GDP growth rate in both 2024 and 2025 has further strengthened the country’s economic outlook.
Overall, the Central Bank states that these developments signal a positive and stabilizing trajectory for Sri Lanka’s economy.
