The country experienced a period of strong economic growth and poverty reduction following the end of a 26-year conflict in 2009, culminating in its categorisation as upper-middle income class in 2019, before falling below this threshold in 2020 in the wake of the COVID-19 pandemic. A challenging economic situation and debt to GDP ratio has been a concern and poses risks for peace and development gains made in recent years.

By late 2021, mobility indicators following COVID-19 movement restrictions, returned to their pre-pandemic levels and tourism started to recover, but a deteriorating fiscal situation and disruptions to key inputs continue to exert pressure on the economy and the livelihoods of all Sri Lankans. The economy expanded by 3.7 per cent in 2021 following a contraction of 3.6 per cent in 2020. Reduced tax revenue and additional expenditures to address COVID-19 both contributed to a sharp increase in central government debt, from 86.8 per cent of GDP in 2019 to an estimated 102.8 per cent of GDP in 2021. At the same time, the continued impact of the pandemic combined with prior imbalances weighed increasingly on the country’s foreign exchange reserves, impacting pricing and access to essential imports including fuel, gas, and food items. Another compounding factor was reduced food crop production in 2021 compared to the previous year.

In line with these developments, year-on-year inflation has increased to 15.2 per cent in February 2022—one of the highest in Asia—and puts additional pressure on all consumers, especially the most vulnerable population groups. As a result of these complex challenges, considerable progress made towards the SDGs over the last year is at risk of stalling. Further disruptions could translate into lower living standards, especially for the most vulnerable populations, as a result of income and employment losses and reduced fiscal capacity for essential government services. The World Bank estimated that as of March 2021, over 500,000 people may have been pushed into poverty as a result of the pandemic, with job losses most concentrated in urban areas and among middle-income earners. Restoring macroeconomic stability and debt sustainability will therefore be key objectives for the year ahead and are crucial to longer-term progress in Sri Lanka towards the Sustainable Development Goals.

While the number of COVID-19 cases remained comparatively low during 2020, May to September 2021 saw a pronounced peak driven by the new Delta variant. Authorities invested heavily in the COVID-19 vaccination programme, quickly expanding its coverage to a large majority of eligible people with first, second, and booster doses. The Government continued to deploy a broad-based set of public health and relief measures, including intermittent movement restrictions. The Sri Lankan population, despite increasing impacts on their livelihoods and well-being, demonstrated high levels of community resilience and solidarity in the face of the pandemic.

The United Nations in Sri Lanka worked alongside Government entities from local to national level towards policy solutions that meet the needs of the most vulnerable populations. Advocacy and technical expertise was extended across all Sustainable Development Goals, including SDG16 on peace, justice and strong institutions, as well as relevant human rights commitments and gender equality. Examples of such efforts in the justice sector included addressing prisoners’ rights and overcrowding in prisons, as well as advocating for non-custodial measures for drug-dependent persons. In 2020, the government of Sri Lanka decided to withdraw support for the UN Human Rights Council resolution 30/1. This changed the landscape and space for UN peacebuilding programming in Sri Lanka. However, throughout the year, the United Nations Joint Programme for Peace (JPP) continued to support government and civil society efforts with regards to dealing with the past, social cohesion and resettlement. The JPP is implemented by eight UN agencies and supported by four development partners (US, UK, Canada and Australia) within the UN SDG Pool Fund’s Peace Window. It works in partnership with a number of government line ministries and civil society in the northern and eastern regions of the country. There remain unresolved post conflict legacy issues, as well as new fractures, that pressurize inter communal relations and UN Sri Lanka continues to support key processes in this regard.

A high-level dialogue on the Sustaining Peace agenda also took place during the visit of United Nations Assistant Secretary-General Khaled Khiari. Further strengthening of rights-based and inclusive approaches to sustainable development remains an important partnership goal of the United Nations in Sri Lanka, addressing persistent challenges noted in reports of the United Nations High Commissioner for Human Rights and Human Rights Council resolution 46/1 of 2021. More sustained dialogue with minority groups and civil society, as well as legislative reforms, are equally important and constitute areas where notable commitments were made by the Government during the course of the year.