Sri Lanka’s economy has slowed in recent times as external and internal imbalances, cumulating in balance of payments difficulties have forced the country into an IMF program. The accompanying painful but necessary structural reforms include tighter lending conditions to curb domestic credit expansion and fiscal consolidation to address the significant budget deficit and growing public debt burden. But whilst these reforms have weighed on domestic demand, they are necessary for more sustainable growth in the future. The IMF expect growth will remain around 5% p.a. over the coming years.
Sri Lanka is currently a lower-middle-income economy, but is projected to reach upper-middle-income status by 2025. But the low income per capita disguises the large pool of well-educated Sri Lankans and the abundance of human capital.