COLOMBO & JAFFNA
On the streets of Colombo, the mood is cautiously hopeful, but never too far from anxious. Just three years ago, long queues for fuel, hours of power cuts and soaring food prices triggered the Janatha Aragalaya, the popular uprising that toppled a president. Today, buses run mostly on time, the lights stay on and supermarket shelves are stocked again. The government of President Anura Kumara Dissanayake, which completed a year in office on September 23, insists that the country has turned a corner. Officials cite rising remittances, revived exports and growth in shipping and tourism as proof of a new economic foundation.
The optimism is not confined to Colombo. About 400km to the north, the Tamil heartland of Jaffna also looks forward to better days. Saravanamuthu Velusamy, president of the bus transport owners’ association in Jaffna, waits eagerly at the Myliddy port for Anura, who is visiting the city to launch the third phase of the harbour development. Saravanamuthu, who operates a daily bus service from Kankesanthurai to Jaffna, says his income has steadied. “I suffered during the Covid lockdown and later during the economic crisis. But now, as the fuel price is steady, my income is steady, too. I was able to repay my loans,” he says.
Saravanamuthu is confident that the Anura government will push inflation down further and that fuel prices will eventually return to pre-Covid levels. His friend Arulrathinam Anthony, who owns a fishing boat, shares the optimism. “It is just a year since Anura took over. The ruling National People’s Power coalition has promised to reduce prices and support Tamils,” he says.
Arulrathinam is pleased that Anura has taken up the Katchatheevu issue, sending what he sees as a firm message to India. “By visiting Katchatheevu he made it clear that there will be no compromise on the issue,” he says. Katchatheevu is a small island in the Palk Strait, claimed by both India and Sri Lanka in the past. India relinquished all claims in 1974. Last year, however, Prime Minister Narendra Modi accused the Congress government of Indira Gandhi of having given away the island “callously”, sparking a controversy.
It is 9:30 in the morning, and the ocean is calm, with fishing boats swaying gently at the harbour. Men and women queue for a security check. An hour later, Anura makes his entry, dressed in black trousers and a pale brown shirt, his stubble neatly trimmed. He waves to the crowd as he walks to the jetty. “My government is committed to peace and the integrity of the nation. Sinhalese, Tamils and Muslims should live together,” he says. “We are working tirelessly to solve the country’s issues without dividing it into north, south or east, and are paying increased attention to the economic challenges faced by the people in the north.”
No other Sri Lankan president has received such a warm welcome in the Tamil-dominated Northern Province. Anura has visited the region at least thrice since taking office. He has a packed itinerary in Jaffna, including the inauguration of an e-library project and the groundbreaking ceremony for an international cricket stadium.
United colours: President Anura Kumara Dissanayake (seen with folded hands) with religious leaders in Jaffna | Salil Bera
Anura’s rise in Sri Lankan electoral politics has been swift. During the September 2024 presidential campaign, the slogan ‘Rata Anurata’ (the country is for Anura) proved immensely popular among citizens disillusioned with mainstream parties. Sri Lankans elected him president with a clear majority, and two months later gave his NPP coalition a decisive mandate in the parliamentary elections.
For a country that endured the worst political and economic crisis in its history, Anura has emerged as a saviour, steering Sri Lanka into recovery. Although he opposed the bailout package offered by the International Monetary Fund before the elections, his government has quietly accepted some austerity measures. The finance ministry has brought debt rescheduling, inflation and fiscal deficit under control. Prices of essential goods, including fuel, remain largely stable and the rupee has held steady at around 300 to the dollar in recent months. Tax revenue has risen from 7.3 per cent of the GDP in 2022 to 13.9 per cent this year. “Our foreign reserves have reached $6.1 billion, with a target of $7 billion by the end of the year. The country has stabilised economically,” says Deputy Minister for Economic Development Anil Jayantha Fernando. The government has also been tough on corruption.
In Colombo, Supun Wickremaratne, who works in a supermarket, welcomes the clampdown on corruption. “When they don’t take our money in the name of corruption, we are safe. The government can serve the people with our tax money. It is good they arrested former president Ranil Wickremesinghe. They should take action against all who were corrupt,” he says. Supun, however, sees former president Mahinda Rajapaksa differently. “He stopped the war. He wasn’t corrupt.” Many Sinhalese believe that while Rajapaksa ended the war, the wider political elite crippled the country through corruption, which Anura now seeks to root out.
By evening, the Lotus Tower complex in Colombo is bustling with Sri Lankan and foreign tourists. Queues stretch to the elevators, which carry groups of 30 at a time to the top floor for panoramic views of the city and coastline. “In the past eight months, the number of tourists has surged,” says Madhutha Liyanarachchi, a manager at the tower.
Tourism, devastated first by the 2019 Easter bombings and later by the 2022 economic crisis, is now recovering strongly. In 2024 Sri Lanka welcomed more than 20 lakh tourists, a 38 per cent rise on the previous year. “Looking ahead, projections for 2025 are optimistic. We are receiving visitors from India, Europe and beyond, thanks to the government’s efforts to improve infrastructure, diversify offerings and promote the country abroad,” says Buddhika Hewawasam, chairman of the Sri Lanka Tourism Development Authority.
Investor-friendly measures, particularly streamlined approvals for new projects, have boosted confidence in the sector. In the first quarter of 2025 alone, tourism earned $1.12 billion, up 9.4 per cent year on year, with more than seven lakh arrivals. The industry is on track to meet its goal of 30 lakh visitors and $5 billion in revenue by 2026. India remains the largest source of tourists, accounting for over a quarter of arrivals. Visitors from the UK, Germany, Australia and China also contribute significantly.
Casinos and gaming are among Sri Lanka’s key tourist attractions. The opening of the integrated resort, City of Dreams Sri Lanka, has transformed Colombo’s casino landscape, creating new opportunities for revenue. The resort, built with an investment of $1.2 billion, has created more than 1,500 jobs and strengthened Colombo’s position as a hub for high-spending visitors from India, China and southeast Asia. The International Finance Corporation, part of the World Bank group, is a key player, investing close to $800 million in Sri Lanka to keep tourism businesses afloat and safeguard jobs.
Casinos have long been tied to Sri Lanka’s politics, economy and tourism. Colombo’s first casinos appeared in the late 1980s, but the lack of a proper regulatory framework meant the state failed to capture steady revenue. The Anura government passed the Gambling Authority Act, creating a regulatory authority to licence operators and enforce compliance. Interestingly, Anura, who once opposed casinos, was present at the opening of the City of Dreams along with actor Hrithik Roshan.
Business leaders, however, warn of complications, especially since the new law allows casinos on ships docked in Sri Lankan waters. “What if China decides to anchor a ship here for years and run a casino onboard? How will we handle that?” asks a Colombo casino operator.
Sri Lanka’s economic collapse was most visible in its once-proud export sector. By 2022, merchandise trade was unravelling, dragging down industries that for decades had kept foreign currency flowing in. Tea and garments, the bedrock of export earnings, were the hardest hit. A sudden ban on chemical fertilisers, coupled with strict rules that forced exporters to repatriate foreign earnings within days, proved disastrous. Tea production dropped by 15 per cent and shipments fell to historic lows.
Apparel, which normally accounts for more than half of export income, shrank by a quarter in a single year. The decline was stark by January 2023, when garment exports dropped to almost a fifth compared with the year before. Imports of textiles also slid sharply, a sign of weakened demand and struggling factories. For thousands of families dependent on these industries, the crisis meant layoffs, pay cuts and an uncertain future.
Things began to change after Anura took charge. From January to July this year, export earnings touched nearly $10 billion, up nearly 8 per cent from last year. In July alone, earnings rose more than 12 per cent compared with the same month in 2024. Officials hailed the turnaround as evidence that strategic steps such as boosting competitiveness and widening access to new markets were paying off. For a country battered by mismanagement, even modest gains felt like a lifeline.
Yet the crisis was never only about exports. Energy shortages deepened the misery. In 2022, electricity generation fell by almost 5 per cent after fuel and coal imports dried up. Widespread blackouts forced households into darkness and factories into shutdowns. Sri Lanka’s grid depends heavily on thermal and hydel power, with only a small share from wind and solar. The government has pledged that by 2030 renewables will account for 70 per cent of the island’s power.
For now, however, the challenges remain. Transmission systems are outdated, no major power plants have been added in years, and corruption has dogged the sector. Anura has promised to cut energy costs by a third within five years, partly by reforming state-owned utilities. International lenders have stepped in as well—in June, the World Bank approved $150 million to support solar and wind expansion. But investor confidence has been shaky. Earlier this year, India’s Adani Group abandoned plans for a major wind energy project after a dispute over pricing, raising doubts about policy consistency.
Consumers, meanwhile, face steep bills. “My wife and I earn about LKR 1.5 lakh a month. We spend LKR 30,000 on tuition for our daughters and LKR 40,000 on rent, even though we live outside the city. After transport and food, there is little left,” says Upul Madhushan, who manages a garment shop in Colombo. “If someone falls sick, I have to borrow. The government may be cleaner than before, but when will electricity prices fall?” His frustration echoes across middle-class households who feel stuck between pride in the country’s recovery and anger at the high cost of living.
For many, the solution has been to leave. Nearly 20 lakh Sri Lankans—about one in ten citizens—now work abroad, sending money home. Labour migration is not new, but it has taken on fresh urgency since the crisis. The Foreign Employment Bureau recorded more than three lakh people taking overseas jobs in 2022 alone, the highest on record. Passport offices have been overwhelmed. For families left behind, the remittances of children, spouses and siblings have become the difference between survival and ruin.
This is the third great wave of migration in modern Sri Lankan history. The first followed the Sinhala Only Act in 1956, when many Burghers (a small ethnic minority with Eurasian ancestry) left for Australia. The second came during the civil war, as Tamils sought safety in Europe and North America. The most recent wave has been driven less by violence than by economic desperation. The money sent back each month—averaging around $600 million—is now the country’s single most important source of foreign reserves.
Along with remittances, another quiet success has been the maritime economy. Shipbuilding, fisheries and related industries employ over a lakh people directly, with many more benefiting indirectly. Boat exports alone brought in close to $80 million last year. In June, the Indian government run Mazagon Dock Shipbuilders Limited bought a controlling interest in Colombo Dockyard, Sri Lanka’s biggest dockyard for Rs452 crore. Encouraged by fresh Indian investment, the government hopes the sector will generate $2 billion annually within the next few years. For a country seeking to diversify beyond garments and tea, the oceans are becoming a promising frontier.
All this has helped Sri Lanka move from deep crisis to relative stability. Inflation has fallen, reserves have grown and the rupee has steadied. But the recovery is fragile. As former presidential adviser Asoka Seneviratne puts it, “Stability today rests on external crutches—the IMF programme, debt restructuring and remittances. Without reforms in governance and revenue collection, Sri Lanka risks slipping back rather than moving forward.”
The political backdrop is equally important. Wickremesinghe, who took the reins during the chaos of 2022, pushed through tough measures that saved the economy but ruined his political standing. He secured an IMF bailout, restructured $25 billion of debt and raised taxes to painful levels. It stabilised the country but alienated voters.
Anura has inherited that framework, even though his party had opposed it. His government continues with high taxes and fiscal restraint while trying to project a more populist image. Officials point to growth figures above 5 per cent this year as proof that discipline is paying off. “We are working within IMF limits but still exceeding growth expectations,” says Deputy Finance Minister Fernando. “Investor confidence is returning and revenues are on target.”
But public patience is wearing thin. During the elections, Anura’s party had promised thousands of teaching jobs for graduates. That has not materialised. Teachers, police and soldiers are all pressing for wage hikes, saying salaries no longer cover basic needs. “We joined the protests in 2022 because we wanted a better future,” says Dilshan Soma, a young schoolteacher in Colombo. “We voted for Anura because he promised to fill vacancies and raise pay. But nothing has changed for us. Without higher wages, families will keep borrowing at high interest rates and sinking deeper into debt.”
This mix of progress and frustration defines Sri Lanka today. Ports are busier, exports are rising and the spectre of default has receded. Yet, households still struggle with bills, investors remain wary and promises remain unmet.