Sri Lanka Upgraded to Upper‑Middle‑Income Status by World Bank

The World Bank reclassified Sri Lanka from lower‑middle‑income to upper‑middle‑income, effective 1 July 2026 for the fiscal year 2026‑27. The country's GNI per capita reached US$4,670, just above the US$4,636 threshold, after real GDP grew 5.0 % in 2025 driven by a broad‑based industrial rebound and strong services growth, especially in finance and tourism. This marks the second time Sri Lanka has entered the upper‑middle‑income band, the first being a brief stint in 2019, and is presented by the Bank as a “hard‑won” milestone of recovery.

The Bank cautioned that the upgrade remains fragile: public debt stays elevated, growth is projected to slow to around 3 % in 2027, and exchange‑rate or data revisions could push the country back below the line. It also noted that GNI per capita is an average measure that does not capture income distribution, with many households still facing cost‑of‑living pressures.

In parallel, the World Bank approved US$150 million under the “Regrowth for Growth, Resilience and Openness” (REGROW) Development Policy Operation to support Sri Lanka’s reform agenda. The financing will back measures to improve the investment climate, reduce trade barriers, strengthen the financial sector, expand women’s employment and boost competitiveness in the power sector. World Bank Country Manager Gevorg Sargsyan said, “Sri Lanka has made significant progress in stabilising its economy, and now it is critical to advance reforms that can unlock private investment, facilitate high‑value export and create jobs.”