Sri Lanka: State of the Economy 2022

Sri Lanka’s economy faces its harshest economic downturn in 2022 as it seeks to adjust to a severe bout of macroeconomic instability. In April 2022, the country announced its intentions to default on foreign debt settlements in the face of dwindling foreign reserves and acute shortages of imported essentials. The shortages, amidst galloping cost of living pressures, generated widespread public and social unrest in the country.

Policy adjustments to restore macroeconomic stability will result in a painful period of economic hardship in the medium term. The most crucial will be to establish sustainable fiscal frameworks and targets. Tax increases and spending cuts and/or freezes will limit the government’s ability to support lower income households that are most disproportionately impacted by the impacts of high inflation. For any recovery to be equitable and sustained, Sri Lanka must pay renewed attention to pursue a development framework that puts the wellbeing of its most vulnerable and disadvantaged as the priority. The Sri Lanka: State of the Economy 2022 report aims to prioritise and analyse these key issues through the framework committed to under the Sustainable Development Goals (SDGs) to drive policy action for economic and social stability.

Research team

IPS Research Team



Published Year