Business

The unlocked potential of ageing and Silver Economy in Sri Lanka

Published

1 week ago

2026/03/21

Dr Bilesha Weeraratne_IPS

With over 18% already aged 60 and above—and one in four projected to be 60 or older by 2041—the Sri Lankan population is rapidly ageing. IF harnessed effectively, the elderly population and the related Silver Economy have great potential to contribute to Sri Lanka’s economy. This blog analysis shows the challenges and the possibilities for Sri Lanka to reap demographic dividends by unlocking the potential of the ageing population and the related Silver Economy.

Demographic Dividend and Silver Economy

Although population ageing poses challenges such as slower growth and increased fiscal pressures, healthier ageing trends offer a silver lining by boosting labour force participation, extending working lives, and enhancing productivity. Population ageing becomes a demographic dividend when the older population is considered an economic asset, rather than a social burden, and the potential of the change in the age structure is harnessed to accelerate economic growth. This involves creating employment and other economic opportunities, products, and services required by the elderly.

The Silver Economy refers to the economic opportunities associated with the growing public and consumer expenditure related to population ageing and the specific needs of the 50+ population. It is the system of production, distribution, and consumption of goods and services, targeting older adults, who are recognised as active economic agents with spending power, life experience, and growing demographic significance.

Changing Population Dynamics

To trigger a demographic dividend, this older population requires accumulated savings and investments to finance consumption during their retirement. However, the status quo of the elderly in Sri Lanka is mostly gloomy. In recent years, 49% of 55-64 year old cohorts were economically inactive, while the labour force participation rate for males and females were 36% and 11%, respectively. This suggests limited interest, capacity, and/or employment options. For instance, the retirement age of 60 years restricts formal employment opportunities for the elderly. Hence, a majority of older workers are employed in the informal sector, which underutilises their skills and underemploys them. Similarly, the elderly have limited options for part-time and flexible work, and are dissatisfied with participating in work. With the current average life expectancy of 75.5 years, they face about 15 years of post-retirement life with limited income and employment opportunities.

Additionally, only 31% of those above retirement age received a pension in recent years. Over three-quarters of retired persons were net dependants, and 91.7% did not receive any income from savings. Among those with savings such as the Employees’ Provident Fund (EPF), most spent their EPF without saving or investing for later life. Estimates suggest that by 2030, the economic old-age dependency ratio in Sri Lanka will reach 29.2%. Moreover, the 65+ years population had the highest multidimensional poverty headcount ratio (17.9%) in 2019. The age group of 36-64 years, including those who will be 60+ years in 2037, had a multidimensional poverty headcount ratio of 16%. With the worsening of overall poverty in the post-crisis setting, Sri Lanka’s older population is likely to be more vulnerable now.

Looming Care Crisis

Moreover, there is a growing care deficit – a gap in demand and availability of caregivers, for the ageing population. Around 76% of 65+ years population live with children, which is projected to decline over time with the emerging cultural and social shift from home-based care towards institutional care. Three-generation households are projected to decline from 19% in 2012 to 5% by 2060. The decreased availability of family care due to smaller family sizes and growing female employment will increase demand for commercial care. Yet, as discussed, most elderly people will not have the financial capacity to seek commercial care. At the same time, the elder care sector in Sri Lanka is polarised. On the one hand, there is an excess demand for the limited number of state-run elder care institutions—often of relatively low quality, while fee-based facilities remain unaffordable for the average elderly. Hence, the less-affluent middle-class elderly have virtually no options for institutional care. On the other hand, formal and professional home-based care is costly, while lower-cost options are informal and ad hoc. Moreover, free adult day care centres are limited and often target low-income elders, with almost no paid day-care options for other income groups. Across all care options, there is an acute deficit in both formal and informal care workers. Projections indicate a 149,076 deficit of long-term care workers by 2037.

Silver Economic Strategic Plan

Therefore, without timely strategic action, the ageing population would become a burden to the Sri Lankan society and increase government expenditure on health and other care, pensions, and social protection. The potential demographic dividend would instead become a drag on the economy.

The global approach to reap a demographic dividend includes policies supporting healthy ageing, increasing labour force participation among older individuals, and closing gender gaps in the workforce, to boost growth and rebuild fiscal buffers amid demographic headwinds. In the case of Sri Lanka, targeted strategies are needed urgently to facilitate the elderly to accumulate savings and investments to finance their post-retirement consumption. Similarly, it is important that Sri Lanka creates an ecosystem of affordable products and services for healthy, productive, and dignified lives for this demographic group.

To achieve this, Sri Lanka should focus on two strategic areas:

Prioritise the extension of economic opportunities into later life. This includes employment opportunities, such as phased retirement, flexible working arrangements, part-time work, and work-from-home arrangements targeted at older workers, to engage them in productive economic activities for a longer period. Such activities include adopting an age-friendly certification for businesses and employers to ensure businesses are welcoming, accessible, and responsive to older workers and clients. Another is to increase the minimum retirement age in the formal sector beyond 60 years of age. Moreover, increasing awareness on saving and investing for retirement and expanding related options—such as scaling up coverage of private life insurance and state-led contributory pension schemes—are essential.

Expand care options to not only protect the elderly but also create economic opportunities. This includes scaling up both free and fee-based elder care facilities to cater to all income types across both living-in and day-care options. Another is providing incentives, such as tax breaks or land, for the private sector to invest in care facilities and tie these to subsidised services for low-income elders. Additionally, existing infrastructure and systems, such as Development Officers at the Divisional Secretariats and local government community centres, could be harnessed to provide community-based care. Similarly, establishing and protecting the rights of elder care workers, providing formal Recognition of Prior Learning and certifying their skills would help attract and retain care workers.

By Dr Bilesha Weeraratne,
Research Fellow and Head of Migration and Urbanisation Policy Research at the Institute of Policy Studies of Sri Lanka

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Business

Unit Trust industry remains stable in February

Published

17 hours ago

2026/03/28

Thilina Walpola

The unit trust industry of Sri Lanka reported assets under management (AUM) of Rs. 609 Bn, up 4.0% year-over-year and largely unchanged compared to the previous month. These assets are currently managed across 85 funds by 16 management companies.

AUM was supported by flows to equity-related funds, which doubled year-over-year to Rs. 68 Bn. Fixed income funds, on the other hand, declined by 4.4% year-over-year. In addition, since 2025, there has been a gradual shift from shorter-term instruments towards more medium to longer-term investment options, with inflows into open-ended income funds, open-ended equity index/sector funds, and open-ended growth funds (equity), alongside a decline in flows to money market funds.

During the month, the industry added 2,623 new unit holders, up 69.8% year-over-year, bringing the total number of unit trust investors to 149,573, which represents a 26.4% increase year-over-year.

Commenting on the February industry results, newly elected President of the Unit Trust Association of Sri Lanka (UTASL) and Director/CEO of Senfin Asset Management, Jeevan Sukumaran, stated: “The industry’s performance as at end-February 2026 reflects a degree of consistency, with continued activity in equity-related funds. We are also observing a gradual shift towards more balanced investment allocations across fund categories.”

He further noted: “As we move forward, our priority will be to build on this momentum by enhancing investor awareness, broadening access to unit trust products, and working closely with regulators and market participants to strengthen further the industry’s depth, resilience and long-term relevance within Sri Lanka’s financial landscape. In a dynamic market environment, maintaining a disciplined, long-term approach whilst reinforcing the resilience of the unit trust structure, with its focus on diversification and professional fund management, will remain key priorities for the industry.”

Business

Import price shocks of the Hormuz Crisis 2026: How will this affect Sri Lanka?

Published

17 hours ago

2026/03/28

Thilina Walpola

Dr Asanka Wijesinghe

The supply shock in the commodity market directly affects 39.3% of imports of Sri Lanka, or USD 8.3 Bn, across 951 products.

The price shock extends beyond petroleum and petrochemicals to nitrogenous fertiliser, biodiesel alternatives like palm oil, and food, exerting pressure on food prices.

Currently, price pass-through and demand management are the best options, while easing regulatory barriers, such as licensing schemes, are necessary to ensure food security.

The closure of the Strait of Hormuz has unsettled global energy markets. According to the International Energy Agency (IEA), 20 Mn barrels of crude oil products were transported through the Strait in 2025, which accounted for a quarter of the world’s daily energy needs. The closure has driven fuel futures higher, with the Brent futures reaching USD 112 per barrel on 19 March 2026 . A phenomenon called “backwardation” is clearly visible in the fuel market, implying that spot market prices for “physical” fuel are significantly higher than futures prices for “paper” fuel.

The economic impact of the energy price shock can impact Sri Lanka through various channels, and if hostilities in oil-producing regions continue, the effects will intensify over time. The immediate impact stems from rising commodity markets, including not only fuel but also biodiesel feedstocks such as soybean, canola, and palm oil; petrochemicals; fertilisers that use liquefied natural gas (LNG) as a feedstock; and aluminium and base metals, which demand significant energy for smelting.

Against this background, this article examines the future prevalence of high fuel prices, Sri Lanka’s vulnerability, the impacts on foreign exchange outflows, and the necessary policy measures to mitigate the adverse effects.

High Fuel Prices and the Effects on Sri Lanka’s Import Basket

Given that a quarter of the global energy supply is disrupted, the current energy shock is unprecedented. After the Russian invasion of Ukraine, fuel prices rose above USD 100 per barrel in 2022, and they remained there for roughly 90 days. The high energy cost resulted in a high inflation episode in 2022-2023. As shown in Figure 2, by the end of 2023, energy prices had returned to and stabilised around the pre-invasion level. Notably, Russia’s share of the global energy market was about 11%, while the Hormuz crisis accounts directly for around a quarter of the global energy supply. The energy infrastructure damage so far has also been significant. Thus, high fuel prices may prevail if there is no swift resolution to the crisis. Sri Lanka should consider such a possibility.

Based on 2025 import data, 39.3% of Sri Lanka’s imports, or USD 8.3 Bn, are directly exposed to rising commodity prices. Of this, USD 3.7 Bn are petroleum products, including crude oil, liquid petroleum gas (LPG) and refined fuel. Currently, the fuel price shock is 38.9% when forward-curve movements in Brent futures are factored in. Additionally, energy-intensive base metals and crude oil-based products like plastics and synthetic fibres will be expensive in the world market. These are important intermediate imports for Sri Lanka’s manufacturing sector.

Since natural gas is a key raw material for urea, increasing urea prices, in turn, raises the costs of related agricultural commodities like wheat. As shown in Figure 3, Sri Lanka spent USD 310.1 Mn on fertiliser in 2025, while the import bill for wheat and maize was USD 384.1 Mn. The global increase in fuel prices has boosted demand for biodiesel feedstocks, putting pressure on oil and fat prices, including palm oil used for cooking. Soybean meal and maize are used in poultry feed, so price hikes will have direct nutritional effects on households, mainly through reduced protein intake.

If high prices persist, Sri Lanka’s import bill is likely to increase, as the price response can be inelastic in the short run, which is common for essential commodities with few substitutes. Using 2025 monthly import values and assuming a future fuel price shock equal to the futures market-reflected percentage increase, it is estimated that Sri Lanka’s import bill could rise by USD 1.9 Bn. This means Sri Lanka will incur a 23% increase in imports over the baseline of USD 8.3 Bn. However, the estimated value is at the upper-bound as it is assumed that Sri Lanka would consume the same quantity as in 2025. If high prices persist, adjustments across the entire economy will inevitably necessitate changes in quantity. Demand will contract when a high import price is passed on to consumers. Such a response can be quantified using product-level import demand elasticities. If higher prices lead to reduced demand, Sri Lanka’s import bill could fall by about USD 608 Mn relative to the baseline. However, such a reduction would mainly occur if energy use adjusts in line with longterm demand patterns. This estimate also does not account for wider, economywide adjustments to higher import prices. Under a full demandadjustment scenario, the overall effect would therefore be a net reduction of USD 608 Mn.

Policy Options for Sri Lanka

Although inflationary pressures remain a serious concern for Sri Lanka in the post-Hormuz crisis period, a transparent pass-through of the supply shock to price levels is a suitable policy. While memories of recent high-inflation episodes are still vivid, the Hormuz crisis and the 2022-2024 sovereign debt crises are fundamentally different events. The elevated inflation during 2022-2024 was driven by structural changes in fiscal and monetary policy. Policy implementations such as cost-reflective utility pricing, energy price pass-through, and a floating exchange rate were introduced sequentially, leading to higher inflation. The economy was moving toward reforms to address multiple distortions introduced by a low interest rate and a controlled exchange rate regime.

In the current crisis, significant price shocks from corrective policies are not anticipated. Instead, inflationary pressure resulting from the Hormuz disruption is an external, supply-side shock primarily transmitted through the prices of imported fuel, rather than via domestic policy reversals. Since high airfares and rising shipping fuel costs may impact foreign exchange inflows, managing the reserve position becomes crucial. In this context, restricting fuel consumption is essential while ensuring available fuel is allocated primarily for industrial use.

A fiscal response that suppresses the price signal, such as reducing taxes on certain imported goods, might not be suitable at the moment, as it could boost demand for very costly imported products like fuel. The analysis shows that the import bill can rise substantially if a high price prevails without a quantity adjustment. Notably, under the current framework, such import demands are transmitted to the exchange rate, which can further increase inflationary pressures. However, Sri Lanka should consider easing import licensing schemes for animal and poultry raw materials as global market prices rise, to facilitate imports and secure food supply. Temporarily removing the existing Special Commodity Levy (SCL) on corn imports should also be considered. These products incur small reserve outflows but play a larger role in the country’s protein nutrition.

By Dr Asanka Wijesinghe, Research

Fellow, Institute of Policy Studies of Sri Lanka

Business

Australia hosts ‘Thought Leadership Session’ on disaster recovery

Published

17 hours ago

2026/03/28

Thilina Walpola

The Australian High Commissioner, Matthew Duckworth, hosted a pivotal ‘Thought Leadership’ educational session titled ‘ConnectEd” at his residence in Colombo recently, focusing on disaster recovery efforts following Cyclone Ditwah. This event was part of a series organized by the Australian Trade, Investment & Education division, aimed at fostering discussion on pressing issues in Sri Lanka.

The discussion aimed to reflect this ambition, inviting participants to share their insights and engage with expert speakers. Attendees were encouraged to voice their questions and contribute their perspectives, fostering a collaborative environment for learning and growth.

“As we approach 80 years of bilateral relations between Australia and Sri Lanka, this exchange highlights the enduring value of our partnership built on dialogue and trust. Today, we focus on recovery and rebuilding in the aftermath of Cyclone Ditwah. Effective recovery requires collaboration across various sectors to ensure that we not only address immediate needs but also build resilience over time. I encourage everyone here to actively engage in our discussions, as your expertise is invaluable to shaping a stronger future together, the Australian High Commissioner said in his opening remarks at the event.

He further noted that “this session is being held under Chatham House Rules, which I hope fosters a frank, open, and constructive exchange. A vital aspect here is uniting Australian and Sri Lankan thought leaders, reflecting our longstanding partnership and aligning discussions with Sri Lanka’s broader priorities and ambitions”.

‘ConnectEd’ event was coordinated by Ms. Sandy Seneviratne, Director of Education for the Australian Government based in Colombo. The session brought together key stakeholders to address the challenges and strategies involved in recovering from natural disasters. The dialogue was enriched by insights from notable panelists, Prof. (Ms.) Udayangani Kulatunga, Department of Building Economics at the University of Moratuwa, Sri Lanka, specializing in disaster risk reduction, construction management, and performance measurement and Professor Pat Rajeev, Chair, Department of Civil and Construction Engineering from Swinburne University of Technology in Australia. Lauren Nicholson, Second Secretary for Development at the Australian High Commission moderated the session.

By Claude Gunasekera