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© [2025] The World Bank1818 H Street NW, Washington DC 20433Telephone: 202-473-1000; Internet:www.worldbank.org Some rights reserved This work is a product of The World Bank. The findings, interpretations, and conclusions expressed in thiswork do not necessarily reflect the views of the Executive Directors of The World Bank or the governmentsthey represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this workand does not assume responsibility for any errors, omissions, or discrepancies in the information, or liabilitywith respect to the use of or failure to use the information, methods, processes, or conclusions set forth. Theboundaries, colors, denominations, links/footnotes and other information shown in this work do not implyany judgment on the part of The World Bank concerning the legal status of any territory or the endorsementor acceptance of such boundaries. The citation of works authored by others does not mean the World Bankendorses the views expressed by those authors or the content of their works. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privilegesand immunities of The World Bank, all of which are specifically reserved. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of itsknowledge, this work may be reproduced, in whole or in part, fornon-commercialpurposes as long as fullattribution to this work is given. Attribution Please cite the work as follows: “World Bank. 2025. Better Spending for All.© World Bank.” Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications,TheWorld Bank,1818 H Street NW,Washington,DC 20433,USA;fax:202-522-2625;e-mail:pubrights@worldbank.org. Photo Credits: Cover, Context, and Recent Developments: Thilina Kaluthotage; Executive Summary, Outlook,and Special Topic: Nazly Ahmed Preface The Sri Lanka Development Update (SLDU) has two main aims. First, it reports onkey developments over the past 12 months in Sri Lanka’s economy, places these inlonger term and global contexts, and updates the outlook for Sri Lanka’s economy.Second, the SLDU provides a more in-depth examination of selected economic andpolicy issues. It is intended for a wide audience, including policymakers, businessleaders, financial market participants, think tanks, non-governmental organizations andthe community of analysts and professionals interested in Sri Lanka’s evolvingeconomy. The SLDU was prepared by a team consisting of Shruti Lakhtakia (Economist,Economic Policy Department (EP)) and Udahiruni Atapattu (Research Analyst, EP),with inputs from Richard Walker (Senior Economist, EP), Anthony Obeyesekere(Senior Economist, EP),Namoos Zaheer(Senior Financial Sector Specialist, Finance,Competitiveness and Innovation (FCI)),Tatsiana Kliatskova(Senior Financial SectorEconomist,FCI),Niroshi Perera(Analyst, FCI),Marta Schoch (Economist, Poverty),Nandini Krishnan (Lead Economist, Poverty),Patrick Kirby (Senior Economist, SouthAsia Regional Chief Economist’s Office),Gautam Mehta (Associate OperationsOfficer,Country Advisory & Economics SA), and Gregory Smith (Manager,CountryAdvisory & Economics SA). The Special Topicis based onChapter 3 of the 2025 Public Finance Review for SriLanka,titled“Towards a Balanced Fiscal Adjustment”. The Special Topic waspreparedbyAnthony Obeysekare(SeniorEconomist,EP), with inputs from Shruti Lakhtakia,Richard Walker,Felipe Dizon (Senior Economist, Agriculture and Food PracticeGroupSouth Asian Region 1),and Anne Christelle(Food and AgricultureOrganization). The team thanks David Sislen (Division CountryDirector for Maldives, Nepal and SriLanka), Gevorg Sargsyan (Country Manager, Maldives and Sri Lanka), Shabih AliMohib (Practice Manager,EP), Ximena del Carpio (Practice Manager, Poverty),andArvind Nair (Acting Lead Country Economist, Prosperity)for their guidance andcomments on the report. Tracey Ann Plunkett and Yasindu Amarasinghe providedadministration support.Ruwani Rajapakse was responsible for the layout, design,andtypesetting. Buddhi Feelixge and Samitha Senadheera led external outreach efforts. Forquestions, please contact:infosrilanka@worldbank.org The report is based on published data available on orbefore September 15,2025. This report, additional material and previous reports can be found at:•www.worldbank.org/sldu Previous editions:•April 2025:Staying on Trackhttps://documents1.worldbank.org/curated/en/099416504222514112/pdf/IDU-5b9c001a-8831-43a2-92e7-71fbee0f642e.pdf •October2024:Opening Up to the Futurehttps://openknowledge.worldbank.org/server/api/core/bitstreams/c357885f-74d2-460d-84ac-4f8311f4e2f4/content•April 2024:Bridge to Recoveryhttps://openknowledge.worldbank.org/server/api/core/bitstreams/a498539d-ae15-4911-8895-fff713aa063a/content•October 2023:Mobilizing Tax Revenue for a Brighter Futurehttps://openk