WHY IS SRI LANKA STILL POOR? BILLIONS IN EXPORTS, REMITTANCES AND TOURISM—WHERE IS THE PEOPLE’S SHARE OF PROSPERITY?
Colombo — Sri Lanka earns foreign exchange through garment exports, precious stones and jewellery, tea, spices, food products, tourism, information technology and the hard-earned remittances of millions of Sri Lankan workers overseas. Its entrepreneurs trade internationally, its professionals provide services to foreign clients, and its migrant workers send money home to educate children, build houses and support families.
Yet an uncomfortable question continues to confront the nation: if Sri Lanka generates so much economic activity and earns billions of dollars in foreign exchange, why do so many ordinary citizens still struggle to pay their electricity bills, buy food, afford housing and provide their children with a decent education?
Why does a country with an educated population, an internationally recognised apparel industry, valuable mineral resources, a strategic location in the Indian Ocean and an established tourism sector continue to struggle with poverty and economic insecurity?
The answer is not that Sri Lanka earns no money. Nor is it that every dollar generated by exports should automatically be distributed equally among its citizens. The deeper problem is that foreign-exchange earnings do not necessarily translate into higher household incomes, productive investment, better public services or broadly shared prosperity.
Sri Lanka’s economic challenge is therefore not simply to earn more dollars. It is to create an economic system in which those dollars generate more jobs, higher wages, stronger domestic businesses and opportunities for citizens across the country.
Billions earned, but why are households still struggling?
Consider the major sources of Sri Lanka’s foreign exchange.
Apparel manufacturers export garments to international markets. Gem and jewellery businesses sell products that can command substantial prices overseas. Tea, cinnamon, pepper, coconut products and other agricultural goods reach foreign consumers. Tourism brings international visitors whose spending supports hotels, restaurants, transport operators, guides and small businesses.
Meanwhile, Sri Lankan workers in the Middle East, Europe and other parts of the world send remittances to their families. These transfers are an important source of foreign exchange and frequently provide a financial lifeline for households that might otherwise struggle to survive.
But foreign-exchange receipts are not the same as government revenue, and government revenue is not the same as money available for distribution to every citizen.
An exporter must pay for imported inputs, salaries, transport, energy, financing and other business expenses. Some earnings remain within private companies, some finance imports, and some may be reinvested overseas or in Sri Lanka. Remittances are generally received by individual households rather than automatically transferred to the Treasury. Tourism receipts also support a range of private-sector businesses and workers.
The important question is what happens after these transactions take place. How much value remains in Sri Lanka? How much is reinvested in productive industries? How many stable jobs are created? How much tax is collected fairly and efficiently? And how effectively does the government turn those taxes into healthcare, education, transport, social protection and infrastructure?
A country can generate substantial foreign-exchange earnings while ordinary citizens remain poor if productivity is low, wages stagnate, essential costs rise and economic opportunities remain concentrated among a relatively small section of society.
The solution is not to divide export earnings equally by decree. It is to build an economy that enables more people to participate in generating wealth and ensures that the benefits of economic growth reach a much wider population.
IMF recovery: growth is not the same as prosperity
Sri Lanka’s economic recovery must also be examined against the continuing burden of debt.
The International Monetary Fund’s May 2026 review projected economic growth of approximately 3% for 2026, following estimated growth of 5% in 2025. The Fund said debt restructuring was nearing completion, but significant risks to debt sustainability remained. Its September assessment also highlighted external uncertainty and the need to strengthen public finances.
These figures are important because economic growth alone cannot guarantee that every household becomes better off. A country can record stronger GDP while many families continue to experience high living costs, insecure employment and inadequate access to capital.
Debt restructuring can provide breathing space, but it does not eliminate the need to repay obligations or create new sources of foreign exchange. Sri Lanka must earn enough through exports, services, investment and other sustainable activities to meet its external commitments without repeatedly exhausting its reserves.
The government therefore faces two connected responsibilities: maintaining economic stability and creating an economy capable of generating substantially higher incomes.
If the country concentrates exclusively on fiscal targets while failing to expand productive employment, public frustration will continue. Equally, if politicians promise extensive spending without sustainable revenue, Sri Lanka could return to the very financial crisis it is trying to escape.
The answer lies in combining responsible public finances with a more ambitious strategy for private-sector growth.
Free trade: a new route out of poverty?
One potentially powerful instrument is the expansion of free trade agreements and the removal of unnecessary barriers that prevent Sri Lankan entrepreneurs from reaching overseas markets.
Sri Lanka already has trade agreements with India and Pakistan, alongside other regional arrangements. The Thailand–Sri Lanka Free Trade Agreement entered into force in January 2025, although the extent of implementation across different agreements and product categories varies. A proposed free trade agreement with China has also been the subject of negotiations, which were put on hold in 2017.
The question is whether Sri Lanka can use trade agreements more effectively to help ordinary businesses become international businesses.
Take the example of a Sri Lankan furniture manufacturer such as Damro, which has developed a commercial presence in India. Its experience illustrates the potential of taking a domestic brand into a much larger market.
Now imagine a Sri Lankan jewellery entrepreneur seeking to establish a shop in Shanghai, Guangzhou or another major Chinese commercial centre. Consider a cinnamon producer seeking Chinese distributors, a batik designer selling directly to overseas customers, or a small food manufacturer supplying Sri Lankan products to supermarkets and restaurants abroad.
These businesses could generate employment in Sri Lanka, increase demand for local raw materials, improve export earnings and create opportunities for younger entrepreneurs.
But a trade agreement alone will not make these ambitions possible. Businesses also need affordable financing, reliable logistics, transparent regulations, product certification, intellectual-property protection and access to commercial partners. Market access must be reciprocal, and agreements must protect legitimate national interests while allowing competitive businesses to grow.
Sri Lanka should therefore negotiate agreements that go beyond reducing tariffs on goods. Modern trade arrangements can address services, e-commerce, investment, professional mobility, customs procedures and regulatory cooperation.
A Sri Lankan software company, jewellery designer or food producer should have a realistic path to selling internationally without needing to be a major conglomerate.
Can China, India and Southeast Asia become engines of opportunity?
China offers a substantial consumer market, manufacturing expertise and investment potential. India offers geographical proximity, an extensive market and established commercial links. Thailand and Malaysia provide further opportunities for Sri Lankan food, tourism, services and manufacturing businesses.
Europe and the United Kingdom remain important destinations for Sri Lankan exports, particularly apparel, tea, spices and other products. Sri Lanka should preserve preferential access where available and improve compliance with labour, environmental and product standards.
The objective should not be to choose one country over another. It should be to diversify trading relationships so that Sri Lankan businesses can sell to multiple markets and are less vulnerable to a downturn in any single economy.
The government should also help smaller businesses form export partnerships, establish overseas distribution networks and participate in international trade fairs. Commercial sections of Sri Lankan embassies could identify potential distributors, explain local regulations and connect entrepreneurs with reliable investors.
The opportunity is not limited to wealthy business owners. Properly designed programmes could help small manufacturers, women-led enterprises, regional agricultural cooperatives and young technology entrepreneurs participate in international commerce.
Foreign investment must create local prosperity
Free trade should be accompanied by a serious effort to attract productive foreign direct investment.
Sri Lanka needs investment in export manufacturing, renewable energy, logistics, digital services, agricultural processing and tourism. However, investment figures should not be treated as a success in themselves. Projects should be assessed by the quality of jobs they create, skills transferred to local workers, exports generated, environmental standards maintained and taxes paid.
Foreign investors should be able to operate under clear and predictable rules. At the same time, local businesses must have fair opportunities to compete, and public institutions must prevent corruption, favouritism and the granting of unjustified privileges.
Investment that generates only short-term profits without building local capabilities will not solve the country's structural problems.
The government should make it easier for Sri Lankan entrepreneurs to establish overseas branches, enter joint ventures and bring profits from legitimate international activities back into productive domestic investment. Simplified procedures, export credit, business training and transparent foreign-exchange rules could help make this possible.
The real test: prosperity for every Sri Lankan
Ultimately, the measure of economic success is not how many agreements a government signs, how many investors attend a summit or how quickly GDP rises.
It is whether a young person in Jaffna can find a well-paid job, whether a farmer in Anuradhapura can sell produce at a sustainable price, whether a small manufacturer in Gampaha can reach international customers, and whether a family in Colombo can afford decent housing, food, healthcare and education.
Poverty reduction requires economic growth, but it also requires effective public services, targeted social protection, fair taxation, better education and vocational training, and policies that enable workers to share in productivity gains.
Sri Lanka should establish measurable targets for reducing poverty, increasing real household incomes, expanding exports per worker and improving access to business finance. Progress should be published regularly so that citizens can judge whether economic reforms are improving their lives.
The country's foreign-exchange earnings should not be divided equally among every citizen. Instead, the wealth they generate must create a broader distribution of opportunity, employment and purchasing power.
Sri Lanka does not lack every ingredient required for prosperity. It has skilled workers, internationally competitive industries, valuable agricultural products, a strategic location and entrepreneurs willing to take risks.
What it needs is a coherent economic strategy that connects these advantages to global markets while ensuring that the gains reach ordinary households.
The decisive question for Sri Lanka is no longer simply how to recover from bankruptcy. It is how to ensure that recovery becomes prosperity for the many, rather than opportunity for the few.