Sri Lanka stands at crossroads. After five years of multiple crises and many hardfought reforms, our economy made its first tentative steps back to growth in 2025. Following successive contractions, GDP growth has reached a commendable 4.8 percent in 1Q25.

Deflation early in the year offered consumers welcome relief, while an 800basispoint policyrate reduction since 2023 has reignited private credit growth. This monetary easing is expected to nudge inflation back into positive territory—an outcome that, if kept moderate, will support business investment and planning and underpin sustainable economic expansion.

The steady resumption of infrastructure spending, robust remittance inflows and prudent management of foreignexchange reserves have quietly restored confidence that a genuine revival is within reach.

Macro-stabilization yet to reach the household

Yet even as these macroeconomic fundamentals strengthen—anchored by disciplined fiscal policies and decisive monetary easing—daily life remains a stark struggle for a significant majority of Sri Lankans.

Poverty remains high at nearly 25 percent, household incomes still lag behind precrisis levels, and underemployment persists. Rural communities in particular – which are heavily dependent on agriculture – face regular hardships due to variable farm income, crop failures, and food wastage.

Together with erratic weather patterns, rising costs of fertilizer and other inputs, Sri Lanka’s agriculture sector remain state in 2025, even as manufacturing, construction and export‑oriented industries collectively drove growth rates close to double digits, while services—buoyed by more than 1 million tourists to Sri Lanka in the first 6 months alone registered healthy gains.

While the national economy is regaining strength, we cannot lose sight of the tectonic shifts reshaping the global economy. From the ongoing renegotiation of global trade architectures, the fragmentation and potential disruptions of supply chains, and the prospect of radical technological transformations —from artificial intelligence to advanced automation—current developments have the potential to radically redefine competitive advantages on the global stage.

In rebuilding the Sri Lankan economy, we must prepare for this emerging paradigm. We must be bold in identifying new avenues for securing our place in this emerging global order while consolidating and leveraging the unique strengths we already possess.

From high value agricultural products to specialized apparel, and an agile and adaptable new generation of young professionals and entrepreneurs, and of course a geographic location that continues to act as a global nexus for trade, Sri Lanka has many different avenues from which to pursue development.

Banks will be indispensable in this endeavor, acting as both intermediaries and strategic mobilisers of capital. By actively channeling capital into innovation, digital services and high‑value manufacturing, and by reinforcing the institutions that support a new and ambitious generation of exporters and service providers, the banking sector can ensure that investment flows align with national priorities.

The ultimate aim must be threefold: to rebuild livelihoods by connecting entrepreneurs, enterprises, and MSMEs to sustainable credit and skills; to strengthen national economic resilience with strategic underwriting of projects with disproportionate growth potential; and to drive broad‑based, bottom‑up growth that harnesses the unique advantages of every region of the island to the benefit of the whole.

Rebuilding livelihoods at the grassroots

Presently, several important initiatives are being led by the Government to support poverty alleviation including through the expansion of the Awesuma programme. We believe these essential protections must be paired with proactive efforts to rebuild livelihoods, empowering beneficiaries and communities to achieve lasting economic self-sufficiency.

To unlock the full potential of these initiatives, banks must adopt a more ambitious role as strategic intermediaries—bridging savers and investors with the businesses that require growth capital. By streamlining capital flows into priority sectors and tailoring financing solutions to the unique cashflow dynamics of enterprises and communities, the banking industry can ensure that savings are channelled into productive, inclusive investments that underpin sustainable development.

As part of our agrimodernisation drive to create 30,000 Agripreneurs across the country under HNB Sarusara, we encounter countless innovators who are rewriting the rules of rural enterprise. Take, for example, a young potato farmer who had long sold his crop at wholesale prices. After teaching himself about a natural potatochip processor, he approached HNB with a bold proposal: finance the machine, and he would develop a valueadded snack business. We backed his plan, and within two years his operation turned profitable, giving him the confidence to pursue new market opportunities.

Across Sri Lanka, we meet many other spirited entrepreneurs—from spice farms, and fisheries to young designers, software engineers, and even creative professionals – who each possess the drive and local insight to build vibrant businesses that can empower themselves financially, and create quality employment for others.

Our role as a bank is to spot these visionaries early, to tailor financing and advisory support to their specific needs, and to partner with them as they scale. By doing so, we rebuild livelihoods and catalyse a new wave of valueadded enterprises that can compete nationally and even internationally.

At its core, Sarusara seeks to help Sri Lankan farmers understand, integrate and adapt to technology in their work. Confronted with yields well below global benchmarks, rural communities remain tethered to traditional practices not out of preference but because of entrenched knowledge and resource gaps.

We begin by introducing basic laboursaving implements—hand tractors, threshers and minicombine harvesters—but swiftly moves participants towards advanced systems such as droneassisted crop monitoring and mobile soilmapping services. Through pilot schemes set to scale in the coming year, we are laying the groundwork for precision agriculture practices to be scaled across the island, optimising fertilisers, herbicides and pesticides, curbing waste while driving meaningful productivity gains and improving margins for farmers.

In time, the full integration of precision agriculture and automation will free up valuable labour, creating a new imperative: supporting communities as they transition to different forms of employment. As routine tasks become automated, fresh opportunities will emerge for higherskilled roles in equipment maintenance, data analysis and agritechnology entrepreneurship across regional hubs.

Strengthening national economic resilience

To seize these gains, Sri Lanka must invest now in education and vocational training, ensuring that future generations are equipped to thrive in an increasingly technologydriven agrarian economy.

While these technological and agricultural transitions are vital, we cannot expect them alone to deliver game‑changing results in the short term. In the interim, further structural reforms are essential—most notably in our export sector. The crisis laid bare how critical exports are as a growth engine for Sri Lanka, and with thousands of SMEs and abundant natural resources at our disposal, we have the raw ingredients for a robust export renaissance. Yet to truly elevate our global standing, we must cultivate a small cadre of large, home‑grown exporters capable of anchoring entire value‑chain ecosystems.

While capital must continue to be channeled into the grassroots, simultaneously we must also follow the example of Asia’s most dynamic economic success stories – from India and China to Vietnam and South Korea. In each, they were able to focus investment into substantial enterprises, around which vibrant ecosystems were then built.

Sri Lanka too must seek to build a new generation of national champion export brands that can emulate and build on the success of the nation’s current leaders while competing in entirely new markets. Those focused on export manufacturing need to be incentivized to scale themselves up within our Export Processing Zones. Their scale and ambition would not only generate direct export revenues but also spur demand for upstream suppliers, logistics providers and support services, creating a virtuous circle of growth.

From a macroeconomic standpoint, building these national champions must be a strategic priority. Banks have a crucial role to play—designing bespoke financing structures, co‑investing alongside foreign, private and public partners, and underwriting the large‑scale capital commitments that these export leaders require.

To align private capital with public purpose, we must harness our collective expertise and deploy our resources where they will have the greatest impact. In doing so, we will not only restore trust in our economy but also chart a course towards a Sri Lankan revival that is both resilient and inclusive—one in which every citizen can take pride and share in our nation’s success.

To be Continued

By Damith Pallewatte, Managing Director/CEO, HNB PLC