Approximately one-fourth of cash-strapped Sri Lanka's population, was living in poverty last year, despite the economy making a "remarkable recovery" from its worst financial meltdown, the World Bank said in its assessment on Wednesday.
The South Asian nation's growth surpassed the bank's forecast of 4.4%, recording 5.0% in 2024 – the first economic expansion since the 2022 crisis.
"While the economy is recovering, many Sri Lankans are still struggling ... the poverty rate remained alarmingly high at 24.5% in 2024," the lender said in its latest update on the island.
"The labor market continues to struggle, leading to increased emigration as people look for opportunities abroad. Household incomes, employment and overall welfare remain well below pre-crisis levels."
The bank stated that wages have yet to return to their 2019 levels. Since then, poverty – measured by those earning less than $3.65 a day – has doubled.
The bank projected that growth would moderate in 2025 to 3.5%, partly due to global trade uncertainties triggered by the sharp increase in U.S. tariffs.
Sri Lanka defaulted on its foreign debt of $46 billion in April 2022 after running out of foreign exchange to finance imports such as food, fuel and medicines.
Months of protests over acute shortages of essentials led to the toppling of then-President Gotabaya Rajapaksa.
His successor, Ranil Wickremesinghe, secured a $2.9 billion four-year bailout loan from the International Monetary Fund (IMF), cut subsidies and raised taxes to stabilize the economy.
The IMF warned earlier this month that Sri Lanka's recovery could be undermined if punishing U.S. tariffs were reinstated.
The United States is Sri Lanka's largest single market, accounting for almost a quarter of its $12 billion in merchandise exports. The trade balance is heavily in favor of the small South Asian nation.
Washington imposed a 44% "reciprocal tariff" on the island nation before putting it on hold for 90 days.
Sri Lanka has not retaliated but instead has appealed for negotiations with Washington.
The leftist administration led by President Anura Kumara Dissanayake, who came to power in September, has maintained many of the austerity measures of his predecessor and urged all parties to work together to formulate a negotiating strategy with the U.S.
