COLOMBO, November 8, 2026 — New economic data reveal contrasting developments in Sri Lanka’s recovery, with stronger foreign reserves accompanied by persistent poverty, rising household expenditure and growing property-market risks.
Sri Lanka’s official foreign reserves exceeded US$7 billion at the end of October, marking an improvement in the country’s external financial position. Yet newly released household survey findings indicate that 16% of the population was living below the official poverty line in early 2025, highlighting the continuing economic difficulties facing millions of households.
Preliminary Central Bank data place gross official reserve assets at approximately US$7.086 billion at the end of October 2026, compared with US$6.867 billion in September.
The increase of approximately US$219 million, or 3.2%, provides a stronger external financial buffer as the country continues its economic recovery.
However, figures from the Department of Census and Statistics (DCS) present a different picture of conditions experienced by ordinary households.
Preliminary findings from the Household Income and Expenditure Survey (HIES) 2025 show that poverty increased from 14.3% in 2019 to 16.0% during the first quarter of 2025.
The survey also found that average monthly household expenditure had risen to Rs.116,191, compared with Rs.63,130 in 2019.
These figures illustrate an important distinction between improving national financial indicators and the economic circumstances of individual households.
Official Foreign Reserves Exceed US$7 Billion
According to preliminary data from the Central Bank of Sri Lanka (CBSL), gross official reserve assets increased to US$7.086 billion by the end of October.
The figure represents an improvement from the approximately US$6.9 billion recorded in August and September.
The increase is significant because foreign reserves provide a financial buffer against external economic pressures, including disruptions to imports, exchange-rate volatility and unexpected changes in international financial conditions.
A stronger reserve position can also contribute to confidence in the country’s external financial management.
Nevertheless, gross official reserves should not be interpreted as funds immediately available for unrestricted government spending.
The broader reserve measure includes components subject to particular arrangements, including the swap facility with the People’s Bank of China.
The composition and accessibility of reserves are therefore important when assessing the strength of Sri Lanka’s external financial position.
While the October increase represents a positive development, it does not directly establish that household incomes, living standards or purchasing power have improved.
Poverty Reaches 16%, Affecting Approximately 3.42 Million People
The preliminary findings of the DCS Household Income and Expenditure Survey for January–March 2025 indicate that Sri Lanka’s poverty headcount index reached 16.0%.
This compares with 14.3% in 2019, representing an increase of 1.7 percentage points.
Approximately 3.42 million people were estimated to be living below the official poverty line during the survey period.
The findings indicate a reversal of the earlier downward trend in poverty and demonstrate the continuing effects of the economic difficulties experienced by households.
The results are based on preliminary survey data collected from a nationally representative sample of approximately 25,000 households.
The survey examined expenditure across 35 consumption categories, including 19 food and 16 non-food categories.
Average household size was estimated at 3.4 people.
The official poverty threshold used for the first-quarter 2025 survey was Rs.16,417 per person per month, compared with Rs.6,966 in 2019.
This increase reflects the substantial change in the cost of meeting basic household needs over the intervening period.
Importantly, the 16% poverty estimate relates to the first quarter of 2025, rather than being a direct measurement of poverty in November 2026.
The findings have only recently been published and therefore provide important historical evidence of the social impact of Sri Lanka’s economic crisis and subsequent recovery.
Average Household Spending Rises 84.1%
The DCS findings show that average nominal monthly household expenditure increased from Rs.63,130 in 2019 to Rs.116,191 in early 2025.
This represents an increase of approximately 84.1%.
Median monthly household expenditure rose even more sharply, from Rs.47,544 to Rs.94,057.
The increase of approximately 97.8% means that median nominal spending almost doubled during the period.
The figures demonstrate the substantial increase in the amount of money households needed to spend.
However, higher nominal expenditure should not be confused with an equivalent improvement in living standards.
Much of the increase reflects higher prices rather than substantially greater consumption.
After adjusting for inflation, changes in actual household expenditure are considerably smaller.
The distinction is particularly important when assessing economic recovery.
A family spending almost twice as much as it did several years earlier is not necessarily purchasing twice as many goods and services.
In many cases, higher expenditure simply reflects the increased cost of maintaining an existing standard of living.
Household Income Leaves Limited Financial Flexibility
The preliminary survey places average monthly household income at Rs.120,266.
Against average expenditure of Rs.116,191, this leaves a difference of approximately Rs.4,075.
That represents just 3.4% of average monthly income.
Although these are national averages and do not describe every household’s financial position, they illustrate the limited margin between income and expenditure.
Such a narrow difference can leave families vulnerable to unexpected expenses, including medical emergencies, education costs, changes in employment or further increases in essential prices.
Median household expenditure of Rs.94,057 also indicates the substantial financial commitments faced by households around the middle of the expenditure distribution.
These figures underline the importance of evaluating economic recovery through household purchasing power and living standards, alongside conventional macroeconomic indicators.
Central Bank Flags Nearly Rs.2 Trillion in Property-Related Lending
Alongside the household expenditure findings, the Central Bank has identified potential vulnerabilities associated with rising property prices and the banking sector’s exposure to real estate.
According to its Financial Stability Review 2026, commercial banks’ exposure to real estate-related activities approached Rs.2 trillion by the end of June 2026.
This represented approximately 13.7% of total banking-sector loans and advances.
The exposure includes lending connected to housing, construction and property development.
The Central Bank has drawn attention to continued increases in property prices, particularly in segments of the Colombo real estate market.
Rising property values can support economic activity and strengthen the value of assets used as collateral for bank lending.
However, excessive increases can also create vulnerabilities if prices move beyond levels supported by household incomes and underlying market conditions.
A substantial decline in property prices could reduce collateral values and affect the ability of some borrowers to meet repayment obligations.
Such developments could create financial pressures for banks, developers, contractors and other businesses connected to the property sector.
The Central Bank has therefore emphasised the importance of continued monitoring.
Its warning identifies a potential risk to financial stability. It does not mean that a property-market collapse is inevitable or that banks are currently experiencing a systemic crisis.
Treasury Bill Auction Falls Short of Offered Amount
Separate data from the Public Debt Management Office (PDMO) show that the Government raised less than the amount offered at its Treasury bill auction on Wednesday, November 4.
The auction offered Rs.90 billion in Treasury bills.
Approximately Rs.65.90 billion was accepted, leaving a difference of about Rs.24.10 billion between the offered amount and the initial allocation.
Following the auction, the PDMO sold a further Rs.3 billion in 12-month Treasury bills through an additional on-tap offering.
The average rate on these bills was 9.95%.
The additional sale brought the week’s total Treasury bill issuance to approximately Rs.68.901 billion.
This remained about Rs.21.10 billion below the original Rs.90 billion offered.
The shortfall reflects the difference between the Treasury bills offered and those ultimately issued. It should not automatically be interpreted as an inability by the Government to meet its financial obligations.
Treasury bill allocations depend on factors including investor demand, acceptable yields and the debt manager’s decisions concerning borrowing costs.
The outcome nevertheless provides an indication of prevailing conditions in the domestic government securities market.
ADB Water Sector Reforms
Sri Lanka has also continued its engagement with the Asian Development Bank (ADB) over reforms to the water supply and sanitation sector.
The ADB’s Water Supply and Sanitation Reform Program is designed to improve the sustainability, governance and climate resilience of water services.
The programme was structured around two policy-based lending subprogrammes.
The original report referred to the conclusion of negotiations for US$100 million in financing associated with the second subprogramme.
While the ADB has published documentation concerning the second phase, the precise amount and status of any newly concluded financing agreement should be confirmed against the relevant approval and loan documents.
The programme remains significant because improvements in water infrastructure, sanitation services and institutional efficiency can support long-term economic development.
Economic Recovery Must Reach Ordinary Households
The latest figures highlight different dimensions of Sri Lanka’s economic recovery.
The increase in foreign reserves suggests an improvement in the country’s capacity to withstand external financial pressures.
At the same time, the household survey illustrates the substantial social consequences of the economic crisis, particularly the rise in poverty and the increased cost of essential consumption.
The Central Bank’s concerns about real estate lending introduce another consideration: the importance of preventing financial vulnerabilities from developing as economic activity recovers.
Meanwhile, Treasury bill auction results demonstrate the continuing need to manage government borrowing and financing costs carefully.
These developments are not necessarily contradictory.
A country can strengthen its foreign reserves while households continue to experience financial hardship.
Similarly, improvements in financial stability can coexist with risks in particular markets.
The distinction is essential when measuring the success of economic policy.
Higher reserves and stronger financial indicators provide an important foundation for recovery. However, the benefits of that recovery must ultimately be reflected in more secure employment, stronger purchasing power, sustainable household finances and a reduction in poverty.
The newly published poverty figures describe conditions in early 2025. Updated survey results will be needed to establish how far household living standards have improved since then.
Until that evidence becomes available, Sri Lanka’s economic recovery should be assessed through both its national financial achievements and the conditions experienced by its people.
A stronger reserve position is encouraging. A sustained reduction in poverty will provide a more direct measure of whether economic recovery is improving everyday life.
