Digital leap key to Sri Lanka’s structural growth, says IPS
“Technology infusion and digitalisation is a powerful engine to deliver cost-effective economic gains sooner rather than later.” This is the central finding of the Institute of Policy Studies of Sri Lanka’s (IPS) annual flagship report, Sri Lanka: State of the Economy 2025, which stresses that the country must now convert its cyclical post-crisis rebound into a structurally driven growth process. IPS warns that the recovery will hinge on deeper productivity and efficiency gains as external uncertainties persist.
Releasing the report, the IPS said the GDP growth of 4.9 per cent in the first half of 2025 reflected the outcomes of a steady and predictable policy environment. However, it noted that sustaining this momentum would depend on structural reforms, particularly in land and labour markets, and greater openness to trade and investment to improve resource allocation.
“At this mid-point of Sri Lanka’s post-crisis recovery, a critical question is what the source of such productivity gains will be,” the IPS stated, analysing the challenge for policymakers in balancing long-term reform goals with short-term social and economic demands in an economy still recovering from crisis.
The report positions technology infusion and digitalisation as a critical lever to accelerate productivity gains while these broader institutional and policy reforms take effect. While national computer literacy remains low at 39 per cent with sharp disparities such as 17.9 per cent in the estate sector, IPS said the digital economy offers a powerful opportunity to narrow social and regional inequalities. This can be achieved through targeted investments in digital access for underprivileged schools, affordable services, and digital literacy programmes.
The report cited promising foundations, noting that 42 per cent of adults in the poorest 40 per cent of households already use digital payments. “It bodes well to develop Sri Lanka’s growing e-commerce sector or to improve safety and convenience of the country’s public transport system,” the IPS said.
Furthermore, extending digital tools to agriculture via widespread access to extension services can help farmers reduce costs. In an environment of global trade uncertainties, enhancing export competitiveness through product traceability to meet new international regulations will be a distinct advantage.
IPS concluded that embedding such productivity-enhancing technologies into Sri Lanka’s economic model would not only raise efficiency but also support the Government’s objectives for stable and sustained long-term growth as the country prepares to resume its external debt service obligations.
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