What happened to Sri Lanka's economy?

Sri Lanka suffered a catastrophic economic collapse in 2022 — the country defaulted on foreign debt for the first time, ran out of foreign exchange reserves, experienced 70%+ inflation, and faced severe shortages of fuel, food, and medicine. Protests forced the president to resign. An IMF bailout and restructuring are supporting gradual recovery. Source: IMF.

The Sri Lanka Economy in 2024

Recovering from 2022 crisis · Source: IMF & World Bank · Updated May 2026

GDP

$98.96B

Growth

5.0%

Inflation

1.2%

Unemployment

4.8%

GDP/Capita

$4,325

Population

21.9M

Debt (% GDP)

100.8%

Life Exp.

77.5y

Sri Lanka Economic Overview

Sri Lanka experienced one of the most severe economic collapses in recent history in 2022. A toxic combination of excessive government borrowing, ill-advised tax cuts, a disastrous ban on chemical fertilizers, COVID-19 tourism collapse, and depletion of foreign reserves led to sovereign default, 70%+ inflation, and acute shortages of fuel, food, and medicine. Mass protests forced President Rajapaksa to flee the country.

Sri Lanka is now in an IMF-supported recovery program involving debt restructuring, tax increases, subsidy reform, and central bank independence. The economy has stabilized — inflation has fallen dramatically, reserves are rebuilding, and tourism is recovering. Before the crisis, Sri Lanka had South Asia's highest life expectancy and human development indicators — achievements that the crisis put at risk. The garment, tea, and IT services sectors continue to provide export earnings.

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