Sri Lanka's trade dynamics

AFTER experiencing its most severe economic contraction in decades, Sri Lanka’s economy is gradually turning a corner. Between 2022 and 2023, the country underwent a painful but necessary period of adjustment following a debt-fuelled crisis. The latest projections for 2024-2027 suggest a modest but sustained recovery, with signs of improving investor confidence, rising consumption, and renewed capital formation.

- By Visvalingam Muralithas

In 2022, Sri Lanka’s economy contracted by 7.3%, marking the peak of its financial crisis—triggered by unsustainable external debt, a collapse in foreign reserves, and severe governance failures. The impact was widespread, affecting households, businesses, and Government operations alike. Although the contraction moderated to -2.3% in 2023, the economy remained in a fragile state, with private consumption and investment still subdued.

The economy is forecast to rebound strongly in 2024 with real GDP growth of 5.0%, before settling into a more moderate pace of 3.1-3.5% annually from 2025 onward.

GDP growth

Export and import trends

After a strong rebound in 2022 and 2023, exports of goods and services are expected to moderate to 5.6% in 2024, before contracting slightly in 2025. Imports, which dropped sharply in 2022, are forecast to rebound by 11.1% in 2024, potentially putting pressure on the trade balance.

Import composition

Sri Lanka’s total imports have followed a steep upward trajectory over the past decade. From Rs. 2.54 trillion in 2014, imports more than doubled to Rs. 5.74 trillion by 2022. Although 2023 saw a slight decline, provisional figures for 2024 indicate a rebound to Rs. 5.69 trillion.

The post-2020 surge is largely attributed to:

Import trends by category

Food and live animals

2014: Rs. 290.2 b → 2024: Rs. 721.7 b

Despite being an agricultural country, Sri Lanka increasingly relies on food imports—particularly cereals, dairy, and processed items. Rising food imports highlight a gap in local agricultural productivity.