World Bank says Sri Lanka’s ongoing and planned trade reforms, particularly the gradual removal of para-tariffs, could significantly improve the country’s export competitiveness while boosting household consumption.
According to the World Bank’s April 2026 South Asia Economic Update released on Friday, the reforms are expected to increase household consumption by approximately 3.1%, with stronger benefits likely to flow to lower-income households.
The report noted that the planned reduction in import duties would be most significant in emerging export-oriented sectors such as food and beverage manufacturing, along with rubber and plastic products. In line with Sri Lanka’s new National Tariff Policy, the Government plans to fully eliminate the PAL and CESS para-tariffs over a four-year period ending in 2029. The removal of these two major para-tariffs is expected to result in a reduction of around nine percentage points.
At the same time, the World Bank cautioned that the continued use of certain para-tariffs, including the Ports and Airport Development Levy and the commodity export subsidy scheme, could continue to hinder trade efficiency. The report highlighted that relatively high import duties and trade barriers remain a challenge to Sri Lanka’s economic progress and export growth.
The report also pointed to significant external sector risks, particularly Sri Lanka’s vulnerability to global energy price shocks. Rising energy costs could increase import expenditure while placing additional pressure on inflation, fiscal balances, and the current account deficit. It further warned that instability in global energy markets, especially due to tensions in the Middle East, could create additional strain on the country’s macroeconomic stability.
Climate-related risks were also identified as a major concern. The report referenced events such as Cyclone Ditwa as examples of Sri Lanka’s exposure to extreme weather conditions that can disrupt agriculture, damage infrastructure, and slow overall economic activity.
In addition, the World Bank highlighted ongoing structural challenges stemming from the country’s previous economic crisis, including shortages of skilled labour caused by outward migration and delays in capital expenditure implementation.
While acknowledging improvements in Sri Lanka’s primary fiscal surplus during 2025, the report stated that the country still faces pressure to manage public debt and implement reforms in State-Owned Enterprises (SOEs).
Overall, the World Bank noted that proposed trade reforms, including the gradual elimination of para-tariffs, could strengthen trade performance and support economic recovery. However, it stressed that sustaining long-term growth will depend on continued structural reforms and the country’s ability to manage rising import-related pressures on the external sector.
Proposal to Establish a “Gem Bank” Aims to Position Sri Lanka as World’s Wealthiest Nation
A special proposal has been submitted with the aim of positioning Sri Lanka as one of the wealthiest nations in the world, leveraging its extensive gemstone resources.
The proposal was presented to President Anura Kumara Dissanayake by Dr. Thilakasiri Vitarana, Chairman of the All Ceylon Gem Miners and Dealers Association.
At the core of the proposal is the idea of establishing “gem reserves,” similar to the country’s existing gold and foreign exchange reserves managed by the Treasury. The concept is intended to formally recognize and manage Sri Lanka’s gemstone stock as a national asset, with the broader goal of strengthening the country’s economic position.
Dr. Vitarana noted that Sri Lanka’s gem industry holds stocks valued at trillions of US dollars, but much of this wealth remains illiquid and cannot be easily converted into cash. To address this challenge, he proposed the creation of a “Gem Bank of Sri Lanka,” which would help systematically manage and monetize these resources.
According to the proposal, such an institution could help integrate gemstone wealth into the formal financial system, potentially improving foreign exchange reserves and supporting greater economic stability.
The All Ceylon Gem Miners and Dealers Association believes that structured management of gem stocks through a dedicated institution could unlock significant economic value and contribute to long-term national development. The proposal has been submitted for consideration by relevant authorities.
Export Sector Expected to Gain from Lower Input Costs, Says World Bank
