Sri Lanka stands at a turning point where its economic future will be defined by either bold reform or continued decline. With bankruptcy still casting a shadow, reserves running low, and comparisons to Singapore showing how far behind the island has fallen, the next decade will decide whether Sri Lanka rises as a disciplined, innovative economy or remains trapped in debt and stagnation.
Sri Lanka stands today at one of the most decisive moments in its modern history, a moment when the future of its people and the fate of its economy hang in the balance. The nation, which has for decades been celebrated for its literacy, healthcare, and cultural achievements, is now staring at a stark reality: either take bold, long-term steps to restructure and reform its economy or resign itself to a future of stagnation, instability, and perpetual dependence on external bailouts. The government projects confidence in its speeches and statements, but the numbers reveal a harsher truth. To qualify as an upper middle-income nation, Sri Lanka’s GDP must grow at more than 8 percent per year over the next decade, reaching USD 200 billion with a per capita income of USD 9,000. To enter the ranks of high-income nations, the benchmark is even higher, with a required per capita income of USD 13,846. When compared to countries like Singapore, the scale of the challenge becomes even more striking. In 2024, Singapore recorded a GDP of USD 547.4 billion and a per capita income of USD 90,674.07, while Sri Lanka’s GDP stood at USD 98.96 billion with per capita income of USD 4,515.57. The projections widen this gulf further. Within ten years, Singapore’s GDP is expected to reach USD 900 billion with per capita income rising to USD 130,000. Sri Lanka, by contrast, risks stagnation or even regression unless its economic trajectory changes dramatically.
Despite progress in certain areas, the collapse into bankruptcy in 2022 remains a defining scar. It revealed what many had long suspected: the nation’s growth model was unsustainable and riddled with deep structural weaknesses. Governments over several decades had borrowed excessively, often for infrastructure projects that brought prestige but little return. Borrowed funds were frequently spent without proper return-on-investment assessments, inflated projects drained the treasury, and debt was accumulated without credible repayment plans. Particularly damaging was the practice of issuing International Sovereign Bonds and then using them not for projects that generated export revenue but for consumption-driven expenses. As repayments mounted, the mismatch between borrowing and returns became glaring. By 2022, the collapse was unavoidable. The International Monetary Fund was forced to step in with a USD 2.9 billion bailout. Critics decried the austerity that came with IMF intervention, but the truth is that Sri Lanka had no other option. Decades of politically motivated spending, financial indiscipline, and disregard for fiscal prudence left the nation vulnerable. The IMF’s involvement forced successive governments to adhere to stricter economic frameworks, but unless Sri Lanka goes beyond IMF-imposed measures and undertakes its own long-term reforms, bailouts will remain recurring episodes rather than a permanent solution.
The disparity between Sri Lanka and Singapore becomes particularly stark when comparing foreign exchange reserves. By August 2025, Sri Lanka’s reserves were at USD 6.1 billion, a figure that can barely cover two months of imports. Once debt servicing and interest obligations are accounted for, this cushion shrinks further, leaving the nation extremely vulnerable to shocks in global oil prices, currency fluctuations, or geopolitical tensions. Singapore, in contrast, had foreign exchange reserves of USD 390 billion during the same period. Beyond government reserves, Singapore’s financial ecosystem is fortified by vast sovereign wealth funds. The Government of Singapore Investment Corporation managed portfolios worth USD 800 billion in May 2025, Temasek Holdings reported assets of USD 287 billion by March 2025, and the Central Provident Fund controlled USD 463 billion for its 4.2 million account holders. Together, these institutions push Singapore’s estimated total reserves above USD 1.87 trillion, with many analysts suggesting the true figure is even higher. This comparison highlights not only Sri Lanka’s vulnerability but also Singapore’s strength, where massive reserves allow stability, long-term planning, and insulation against crises.
Singapore’s external debt is also far higher on paper, reportedly exceeding SGD 2.4 trillion, but this is misleading because the city-state possesses zero net debt. Its assets far exceed liabilities, reflecting its role as a global financial hub that attracts international deposits and investments. Sri Lanka, by contrast, lacks such a balance sheet. Its external borrowing is not backed by productive assets or financial strength, and its debt is overwhelmingly sovereign and politically managed, with little contribution from private corporate wealth.
Looking back at history reveals just how much ground has been lost. In 1960, Sri Lanka’s per capita GDP stood at USD 152, close to South Korea’s USD 153, ahead of Thailand’s USD 95, and far ahead of Indonesia’s USD 62. Even compared to Singapore, which had a per capita income of around USD 395 to 428 in 1960 and USD 500 by 1965, Sri Lanka was not far behind. Both nations began independence with similar levels of income and development potential. Yet, by 2024, Sri Lanka had reached only USD 4,515.57 per capita, while Singapore had soared to USD 90,674. The divergence is not due to fate but due to policy. Singapore chose industrialisation, disciplined governance, foreign investment, and meritocracy. Sri Lanka chose populism, corruption, and short-termism.
Ironically, Sri Lanka enjoys several advantages Singapore lacks. With 62,710 square kilometres of land and relatively low population density of 370 people per square kilometre, Sri Lanka has far greater agricultural and developmental potential. Singapore, crammed into 700 square kilometres with a density of 8,387 people per square kilometre, faced severe scarcity yet used long-term planning to turn constraint into strength. Sri Lanka, despite fertile land and abundant resources, has failed to modernise agriculture, underutilised its land, and relied excessively on imports for food staples, worsening its trade deficits. Population and land advantages that should have been sources of resilience have instead become wasted opportunities.
The obsession with GDP numbers also clouds the reality. GDP and per capita income are convenient international benchmarks but fail to capture human well-being. Nobel laureate Joseph Stiglitz and other economists have long argued that GDP ignores health, education, equality, and environmental sustainability. Sri Lanka illustrates this perfectly. While it has high literacy rates and decent healthcare outcomes, political instability, corruption, and widening inequality undermine the quality of life. GDP does not measure whether growth is sustainable, whether resources are equitably shared, or whether the environment is being destroyed in the process. As Robert Kennedy once said, GDP measures everything except that which makes life worthwhile. True prosperity must include quality healthcare, universal education, food security, affordable housing, modern transport, technological innovation, and above all, social equality. Without these, GDP growth alone will not translate into meaningful progress.
The projections for Sri Lanka are sobering. If current trends hold with growth at around 3 to 5 percent annually, the GDP will rise from USD 99 billion in 2024 to only about USD 147 billion in 2035. Per capita income would reach around USD 6,300, which remains far below upper middle-income thresholds. To achieve even half of Singapore’s current per capita figure of USD 97,604, Sri Lanka would require GDP of nearly USD 990 billion, a tenfold increase that is virtually impossible under present conditions. A more realistic yet still challenging target is to reach the World Bank’s high-income threshold of USD 13,846 per capita. That would require tripling current per capita income and raising GDP to approximately USD 300 billion within a decade. Even this goal demands a paradigm shift in governance, investment, and policy.
Reaching such targets requires more than slogans. Industrialisation must move beyond raw commodity exports toward value-added industries. Tea, coconut, and rubber must not be sold as bulk commodities but branded and diversified into higher-value global products. Agriculture must be modernised through research, intercropping, and high-yield techniques, reducing reliance on imports while maximising land productivity. Fisheries, with Sri Lanka’s vast maritime potential, must expand into aquaculture and high-value exports. Technology and innovation must become the backbone of a new economy, with investments in artificial intelligence, digital infrastructure, and research. At the same time, foreign reserves must be built through exports, tourism, and foreign direct investment, supported by a national investment framework that ensures stability. Diplomacy too must be reformed, not just for political representation but to aggressively promote investment and exports, engaging both foreign investors and the Sri Lankan diaspora. Above all, governance must change. Corruption, cronyism, and short-term populism must give way to accountability, transparency, and meritocracy. Without this, no economic strategy will succeed.
What is needed most is a complete paradigm shift. Sri Lanka has failed not because it lacks resources or people but because it has lacked consistent, disciplined governance. It has rich cultural heritage, fertile land, and a strategic position at the crossroads of the Indian Ocean. These advantages mean little without visionary leadership that looks beyond elections and focuses on long-term stability. The nation must embrace futuristic and strategic thinking, not nostalgia for past glories. Policies must look forward, aiming to create a fair, equitable, healthy, and dignified lifestyle for future generations. That means earning more, saving more, investing wisely, and planning ahead.
The reality is stark but not hopeless. Sri Lanka has the potential to write a new chapter, but it must act decisively. It can either remain a cautionary tale of missed opportunities or reinvent itself as a success story comparable to Singapore. Economic history shows that nations can rise dramatically within decades when they combine discipline, innovation, and strong governance. The choice lies with Sri Lanka’s leaders and its people. If they continue with half-measures and political games, the cycle of debt and stagnation will continue. If they embrace reform, transparency, and bold economic vision, the country can still rise.
Sri Lanka’s destiny is not predetermined. Its long history and cultural richness will always be part of its identity, but its future will be shaped by the choices made now. The next ten years will decide whether the island nation emerges as a model of reform and resilience or sinks further into economic crisis. The stakes could not be higher. The time for half-steps has passed. The nation must choose growth, reform, and innovation—or risk being left behind in a rapidly advancing world.
