Sri Lanka

What does the map enable, and what does it threaten?

Sri Lanka's position on the sea lanes has made it valuable and coveted. Its trade drew south Indian invaders, and the Chola Empire conquered the Anuradhapura kingdom from 993⁹. The Portuguese, Dutch and British each seized the coast for its trade, and Britain took the whole island in 1815⁹. Today its dependence on outside markets shows in other ways: half its petroleum imports and about 40% of its remittances come from the Middle East⁵. Cyclone Ditwah in late 2025 showed its exposure to storms⁷. A well-placed island, exposed on every side.

Is the population growing, skilled and staying?

About 23 million people with a median age of about 34^1,2. Income is modest: the IMF puts GDP per head at about US$5,100 in 2026³. Unemployment rose to 4% in the second quarter of 2026 as more people entered the labour force than the economy absorbed⁸. Many work abroad: the Middle East provides about 40% of remittances⁵. The 2022 crisis brought power cuts of over 12 hours a day and shortages of food and fuel⁹. A capable people recovering from a hard fall.

What habits does the society reward?

Institutional habits are weak but improving. Sri Lanka scored 35 on Transparency International's 2025 index, up three points, ranking 107th of 182¹⁰. The 2022 protests were driven by anger at the government's mishandling of the economy⁹. Since then the state has kept to its IMF programme, adjusting it openly when shocks hit⁵. Survey data on trust and work norms was not gathered, hence medium confidence. This score is about institutions and social habits, not about any group.

Who rules, how are they chosen, and are they competent?

Judged by deeds, Sri Lanka's leaders first ruined and then repaired its finances. The Rajapaksa government's mishandling of the economy led to the 2022 crisis and the president's flight⁹. Since then the debt restructuring of 2024 and an IMF programme have stabilised the economy^6,5. Anura Kumara Dissanayake won the presidency in September 2024 and a two-thirds parliamentary majority in November⁹. When the Middle East war hit, the IMF endorsed a temporary fiscal easing under the escape clause rather than abandoning targets⁵. Repair under way, not yet finished.

Is there rule of law, low corruption and predictability?

Order has been restored after decades of violence. Armed uprisings in 1971 and 1987–89 and a 25-year civil war ended with the defeat of the Tamil Tigers in May 2009⁹. In 2022 protesters stormed the president's residence and forced Gotabaya Rajapaksa to flee⁹. Elections in 2024 brought a new party to power with a two-thirds majority⁹. Crime data was not gathered, hence medium confidence. Calm after a long storm.

Where are the fault lines, and how stable are they?

Sri Lanka's deepest weakness is ethnic division. In 1956 the Sinhala Only Act made Sinhala the official language⁹. In July 1983 anti-Tamil riots broke out after the Tamil Tigers killed 13 soldiers, and civil war followed⁹. The government declared total victory in May 2009, amid allegations of war crimes by both the military and the Tigers⁹. The 2024 elections gave a single alliance a two-thirds majority, a sign of broad support⁹. Peace without full reconciliation.

Why does the world need this country?

Sri Lanka matters mainly for its position. Colonial powers fought for its coast because of its trade⁹. In the Second World War Colombo was the headquarters of Britain's Eastern Theatre⁹. Its economy was about US$111bn in 2026³. Its links to the Gulf through workers and fuel show how far its prosperity depends on others⁵. Its role between India and China was not researched, hence low confidence. A strategic island with a small economy.

What does it need, want and fear?

Need: stable fuel imports and remittances, both heavily tied to the Middle East⁵; and continued IMF support, which has disbursed about US$2.4bn⁵. Want: to return to a primary surplus from 2027⁵; to recover from Cyclone Ditwah through record public investment⁷; and to win a ratings upgrade from CCC+⁶. Fear: higher energy prices and weaker tourism from the Middle East conflict⁵; a new debt crisis⁶; and a return of 2022's shortages and unrest⁹.

Who are its patrons, rivals and hedges?

Sri Lanka depends on lenders and markets more than on allies. Its recovery rests on the IMF programme and the 2024 restructuring with creditors^5,6. Its economy is exposed to the Gulf through workers and fuel⁵. Historically it played colonial powers against each other: the king of Kandy allied with the Dutch in 1638 to expel the Portuguese⁹. Its balance between India and China was not researched, hence low confidence. A small state that needs everyone's goodwill.

Can it deter, or does it depend on others?

Sri Lanka's armed forces are battle-tested at home. They defeated the Tamil Tigers in 2009 after a long war; 6,261 personnel died in the final phase from 2006⁹. SIPRI puts military spending at about 1.31% of GDP in 2025, on an economy of about US$111bn^4,3. Its experience is of counter-insurgency on its own soil, not of deterring outside powers. Readiness data was not gathered, hence low confidence. An army built for internal war, not for deterrence abroad.

Rising, stagnant or declining, and how fast?

Judged by results, Sri Lanka has recovered but faces new headwinds. GDP grew 5.0% in 2025, in line with 2024⁶. The IMF cut its 2026 growth forecast to 3% after the Middle East conflict and Cyclone Ditwah⁵. Inflation is expected to rise to 6.1% by year end⁵. Fitch forecasts growth of 3.7% in 2026 and keeps the rating at CCC+⁶. A recovery that holds, but slowly.