Two in five Sri Lankans poor or vulnerable despite economic recovery: World Bank

ECONOMYNEXT — Although Sri Lanka’s economy has returned to its 2018 size and regained its upper-middle-income status, two in five people remain poor or vulnerable to falling into poverty, the World Bank said in its latest Development Update.

Under a poverty line of 4.20 US dollars a day, poverty is estimated at 16.9 percent in 2025. While down from a peak of 20.7 percent in 2023, it remains well above the 11.5 percent recorded in 2019. In 2026, two-fifths of Sri Lankans are either poor or living within 50 percent of the poverty line, meaning a single shock could push them under.

The estimates use an updated methodology based on annual Labour Force Survey data, which lowered the previously estimated crisis peak of 27.6 percent, though the broader trend remains unchanged.

Weak jobs and stagnant earnings explain much of the continued hardship. Real wages remain about 12 percent below 2019 levels, while labour force participation stood at 49.4 percent in 2025, down from 52.3 percent in 2019. Female participation, at 32.4 percent, is among the lowest in the region. Recent price hikes, including a 21 percent rise in transport costs, also halted the recovery in real incomes in the first half of 2026.

“The increase in living costs comes before many households have rebuilt the financial buffers depleted during the crisis,” the report said.

The burden is also unevenly distributed across the country. Poverty levels are two to three times higher outside the Western Province, climbing to 36 percent in the estate sector.

The lender also warned of long-term scarring among young children. Data on children under five show the share of underweight children rose from roughly 12 percent in 2021 to about 16 percent in 2025, while child stunting increased from around 7.5 percent to about 10 percent during the same period.

While the World Bank projects poverty will decline to 14 percent by 2028, it will still remain above pre-crisis levels.

“The recovery remains narrow unless growth generates a larger number of productive jobs that are more broadly shared,” the World Bank cautioned. (Colombo/Oct6/2026)