A new year of change

The last year was momentous in all sorts of ways. It was the first full year of the new National People’s Power (NPP) Government, the first year after finishing Sri Lanka’s debt restructuring, and a year in which we saw massive global trade shocks and terrible natural disasters. 

Yet through it all, there was both perseverance and transition. Sri Lanka maintained and even grew its new economic structure – that of twin surpluses – and we faced three massive shocks to the economy without things going off the rails. 

A lot of what happened in 2025 will undoubtedly continue into 2026 as well. Global trade remains extremely uncertain. The recovery from Cyclone Ditwah will take up a lion’s share of the first half of the year. What the new Sri Lankan story means will continue to take shape. 

For many years now, every year has been one of transition for Sri Lanka. It looks like that will be the case once again.

Sri Lanka’s big 2025

When we started 2025, it might not have been so obvious how dramatic the year would eventually be. Even now, it might seem as if it wasn’t as dramatic as it could have been. 

Yet so much happened across 2025, so much that in another year and in another economy could have taken the Sri Lankan story in a completely different direction. Yet the very strength of the economy meant we kept going nevertheless.

Let us consider the ‘events’ across the year. We started with the Local Government Elections, where the ruling NPP won a less superlative victory in comparison to its 2024 performance. We opened up vehicle imports, leading to nearly $ 2 billion in imports. 

We faced a global trade war that resulted in our exports being tariffed heavily. There were at least three major military conflicts across the world that involved at least three nuclear powers, with one in our own neighbourhood. 

We had about $ 2 billion in external debt payments in the middle of the year, and nearly $ 2 billion more across the rest of the year. We faced the massive impacts of Cyclone Ditwah. All things considered, 2025 was a very heavy year.

In any other year, even just one of these events would likely have taken Sri Lanka into a dark place. Yet, the structural change in the economy, driven by the persistent twin surpluses we are seeing – both fiscal and external – helped massively. 

Even with post-Ditwah reconstruction, there is likely a massive fiscal strength remaining. Even with $ 2 billion in vehicle imports, we are still seeing current account surpluses. Growth is running strong. In all these respects as well, it was a very heavy year.

What trajectory will 2026 take?

I would be very rich if I could directly answer this question. Yet there are some things that we can say. 

The world is likely to remain at least somewhat chaotic, at least somewhat uncertain. Just look to the many world leaders who warn of change and difficulty in 2026 compared to 2025. That sense of foreboding, that the big changes of 2025 will continue to exist and potentially heighten in 2026, is seeping across the world.

There are many things that will remain unanswered across the world and Sri Lanka in 2026. These will be elements that raise questions across the year and beyond as well. 

A world that is changing rapidly – technologically, geopolitically, economically, socially, and in any other ‘-lly’ that you can think of – will not be one that is easy to deal with. That change, that transition, and the new world that it brings will be a difficult yet necessary reality to grapple with.

In Sri Lanka, unlike at many points in the past, we are facing this challenge with a rare advantage. Rare for us, a country that has never achieved it in the past, but also rare for the world, being a policy mix that is very hard to get in place. 

Our twin surpluses give us a big advantage. We are facing a world of change with big buffers and a set of circumstances that are filling up our buffers faster than we can spend them as well. The change that this brings to Sri Lanka can be absolutely massive – and beyond anything that anyone in living memory has a reference to.

As we move into this new year, and into what I think we can call the late 2020s, we are faced with all these questions and more. No doubt we will face more questions. Perhaps we will find some answers along the way, but even these might have to be reworked again for a world that is changing fast. 

Yet for Sri Lanka, armed with our newfound economic strength, we might have a chance to seize the year more than we ever have before.

Source: The morning