Sri Lanka

Known as Ceylon until 1972, the island country lies in the Indian Ocean 432 km in length and 224 km in width. The Palk Strait lies between the southern area of India, Tamil Nadu, and the north-western coast of Sri Lanka; the proximity between the two countries lends to their intertwined culture. Ram Setu, also known as Adam’s Bridge, is a famous chain of shoals made of limestone that used to connect India and Sri Lanka before the 1480s. Sri Lanka’s geographical location as a crossroads of maritime routes over the Indian Ocean is why the southwest city of Colombo was an urban centre for trade and remains the executive and judicial capital of Sri Lanka while Sri Jayewardenepura Kotte is the legislative capital. 83% of the island is made up of the Central Highlands; the area of which is diverse in terrain consisting of plateaus, ridges, intermontane basins, and valleys. The island has magnificent escarpments in the north and northeast area of the highlands, the most amazing of which is called the World’s End, which has an almost vertical 4,000-foot precipice. The area surrounding the highlands is a mostly flat plain which is fringed by a coast of jagged promontories and cliffs, deep water bays, sandy beaches, and lagoons. Sri Lanka (formerly Ceylon) joined the Commonwealth in 1948. In 1938, Sri Lanka participated in its first Commonwealth Games in Sydney and celebrated it by taking home the boxing gold medal.

Demographics

The population of Sri Lanka is estimated at approximately 23.2–23.3 million in 2026. The city with the most population density remains the Colombo metropolitan area. Around 18–19% of the population lives in urban areas. Sri Lanka is a country with many ethnic groups, but the two predominant ones are the Sinhalese (approximately 75%) and the Tamils (around 11%), while the rest of the population consists of Sri Lankan Moors (around 9%), Indian Tamils (around 4%) and smaller groups such as the Burgher people, Vedda, Bharata, Sri Lankan Chetties and more. Sri Lanka has two official languages, Sinhala and Tamil which are spoken by the large majority of Sri Lankans. English continues to be widely used as a link language in government documentation and business. The major religions practised in the state are Buddhism (around 70%), Hinduism (around 13%), Islam (around 10%), Roman Catholicism and other forms of Christianity.

History (Original historical narrative retained in full through independence and the early republic period.)

In 1505, Portuguese envoys arrived seeking cinnamon, a spice of high value to them, and requested the King Vijaybahu of Kotte permission to build a fort for their expedition, which was granted. Due to increasing demand for more quantities at low prices, it led to a war between them in 1520-21 which the Portuguese won. The King was subsequently deposed by his three sons and the kingdom was divided. The eldest became King, Bhuvinaika Bahu, who ruled at Kotte and the younger two were given independent kingdoms at Sitawake and Rayigama. King Bahu and the ruler of Sitawake, Mayadunne, fought frequently as the eldest relied on the Portuguese to help reinforce his rule while Mayadunne resented Portuguese influence and wished to expand his kingdom. In 1543, King Bahu signed a contract with the Portuguese in 1543 asking for them to protect his grandson and heir to the throne, Prince Dharmapala, in exchange for more privileges and tributes of cinnamon. When King Bahu died in 1551, Dharmapala was educated by the Franciscan order and converted to Christianity in 1556 and many political elites followed suit. Mayadunne’s son continued the struggle against the Portuguese but was defeated and killed in 1593 after which Sitawake also collapsed. The Portuguese annexed Kotte and Sitawaka in 1597 and the Kingdom of the Jaffna peninsula in 1619. Catholicism was spread by missionaries and Portuguese began to be used as the language of the land; due to which the locals gained proficiency in it. Although separate attempts were made to capture the Kingdom of Kandy in the central highlands, they were unsuccessful.

In 1636, King Rajasinha of Kandy began to rely on the Dutch to expel Portuguese forces, sensing the latter’s decline in power. He received Dutch envoys the following year and the Dutch agreed to take over Portuguese ports in exchange for compensation of expenses. From 1638 to 1640, the Dutch captured several ports and after a temporary peace treaty between the two European powers from 1640-1652, war resumed between them. As Kandy continued to rely on the Dutch, the latter captured Colombo in 1656 and Jaffna in 1659, and eventually war broke out with Kandy as well in 1760 and as the Dutch came out victorious, Kandy was forced to recognize their sovereignty and gave up their parts of the coastline. Being Protestant, the Dutch reversed the Catholic teachings and declared them illegal, focusing on spreading Protestantism via schools and increased printing facilities. By setting up publishing facilities and transport for monks to travel to and from India, there was a revival of Buddhism and Hinduism in the Sri Lanka, and Christianity was used and discussed in Tamil and Sinhalese literature. Tobacco and coffee plantations began being set up during this time which elevated Sri Lankan products value in European markets.

When the French Revolution began in 1792 and the Netherlands came under French control, the British East India Company arrived in Sri Lanka from India and faced little resistance from the Dutch who surrendered in 1796. Sri Lanka became a crown colony in 1802 by the Treaty of Amiens with France, after which the territory was given the name “Ceylon”. Initially, they followed the way of the Portuguese and Dutch by offering the kingdom of Kandy protection in return for incentives, but ultimately decided on attempting to integrate Kandy into the crown colony for better access and less expenses. The first attempt at capture in 1803 failed due to the loyalty of the nobility with the king of Kandy. But after manipulating dissent amongst Kandyan chiefs the British succeeded in 1815, ensuring that laws and customs remained unchanged. Protests against Kandy losing its separate status were suppressed in 1818. Reforms were introduced in 1833 whereby English was made the official language and a unitary administrative and judicial system was adopted for the whole island. The Executive and Legislative councils were set up. Road networks were built, ad agricultural plantations, especially for coffee, rubber, and coconuts were encouraged through cheap prices for land for cultivators. Due to a leaf disease that spread in 1870s, Ceylon coffee crops were destroyed and were eventually replaced by tea. Increasing trade led to industrialization and transport system construction. By the end of the 19^th century, national sentiments began to rise in every echelon of Ceylon society, even the Buddhists and Hindus who began to reject Christianity taught in schools compulsorily. Regional and communal associations and unions began voicing for reform demanding participation in the executive branch and more representation in legislature via elective means; however, due to lack of coordination reforms of 1910 did not bestow more than recognition of elective principles in the Legislative Council. Further concessions were granted in 1924 and in 1931 a new constitution was granted whereby legislature was elected by universal suffrage, and yet another one in 1946. But with the independence of India, Ceylon too demanded independence. It was agreed that Ceylon would become a dominion in June 1947, and eventually formal independence was granted on 4^th February 1948, and joined the Commonwealth in the same year.

Dr Stephen Senanayake of the United National Party became the first Prime Minister, however he passed away in 1952. His son Dudley Senanayake took over but resigned in 1953 and was replaced by fellow UNP member Sir John Kotelawala. Due to sentiments of marginalization and growing nationalism within the non-English speaking masses, in 1956 their party fell from power. The next government was led by Sri Lanka Freedom Party Leader S W R D Bandaranaike, who introduced the Sinhala Only Bill, making Sinhalese the official language, much to the resentment of the Federal Party representing Tamils. In 1960 he was replaced by his widow Sirimavo Bandaranaike who served as the territory’s first female PM until 1965 when Dudley Senanayake became prime minister again until 1970. In 1971 a rebellion of young people was led by an anti-Tamil organisation called the Janatha Vimukthi Peramuna (People’s Liberation Front), but it was put down in the same year. In 1972 the constitution was reformed, and the country became the Republic of Sri Lanka, while still maintaining its linkage with the Commonwealth.

Key Dates

1948 Ceylon gains full independence on February 4^th. Dr. Stephen Senanayake becomes PM.

1956 Solomon Bandaranaike elected as new PM.

1972 Ceylon becomes a republic and changes its name to Sri Lanka.

2002 Government and Tamil Tiger rebels sign a Norwegian-mediated ceasefire in February.

2009 Government troops capture the northern town of Kilinochchi in January, held for ten years by the Tamil Tigers as their administrative headquarters. President Mahinda Rajapakse urges the rebels to surrender.

2010 President Mahinda Rajapaksa re-elected by a large margin in January elections.

2010 President Rajapaksa’s ruling coalition wins landslide victory in parliamentary elections in April.

2015 Rajavarothiam Sampanthan becomes the first lawmaker from the ethnic Tamil minority in 32 years to lead the opposition in parliament.

2019 Gotabaya Rajapaksa elected President.

2022 Severe economic crisis leads to mass protests and the resignation of the President and Prime Minister.

2024 Anura Kumara Dissanayake elected President; Harini Amarasuriya becomes Prime Minister.

Legal System and Government

Sri Lanka is a democratic republic and a unitary state governed by a mixture of a semi-presidential system and a parliamentary system. Most provisions of the constitution can be amended by a two-thirds majority in parliament. The amendment of certain basic features such as the clauses on language, religion, and reference to Sri Lanka as a unitary state require both a two-thirds majority and approval in a nationwide referendum.

Sri Lanka’s judiciary consists of a Supreme Court, a Court of Appeal, High Courts and a number of subordinate courts. The highly complex legal system reflects diverse cultural influences. Criminal law is mostly based on common law. Basic civil law derives from Roman law and Dutch law. Owing to ancient customary practices and/or religion, the Sinhala customary law (Kandyan law), the Thesavalamai, and Sharia law are followed in special cases. The president appoints judges to the Supreme Court, the Court of Appeal, and the High Courts. A judicial service commission, composed of the chief justice and two Supreme Court judges, appoints, transfers, and dismisses lower court judges. The current President is Anura Kumara Dissanayake and the Prime Minister is Harini Amarasuriya.

Economy

Sri Lanka’s economy is led by the services, industrial, and agriculture sectors, which accounted for approximately 54.6%, 25.4%, and 8.4% of the country’s GDP in 2025, respectively (with taxes less subsidies on products contributing the remaining share). Tourism remains one of the key industries in Sri Lanka and a major foreign-exchange earner, generating approximately US$3.2 billion in 2025. Major tourist attractions include famous beaches around the island located in the southern and the eastern parts of the country, ancient heritage sites located in the interior of the country, and resorts located in the mountainous regions of the country.

The tea industry continues to be another main industry in Sri Lanka, with export earnings of approximately US$1.5 billion in 2025, maintaining the country’s position as a significant global supplier of tea. The central highlands of the country have a low-temperature climate throughout the year and annual rainfall and humidity levels that are suitable for growing crops. The agricultural sector of the country produces mainly rice, coconut, and grain, largely for domestic consumption and occasionally for export, alongside spices and other plantation crops.

Trade

Sri Lanka’s GDP stood at approximately US$109 billion in 2025. Merchandise exports reached about US$13.6 billion in 2025. The top export commodities continued to be textiles and apparel (around 40% combined share of industrial exports), tea and spices, rubber and rubber products, and related agricultural goods. Main export destinations were the United States (approximately 22–23%), India (around 7–8%), the United Kingdom (around 7%), Germany (around 5%), and Italy (around 5%).

Top imports in 2025 were led by mineral fuels/hydrocarbons (around 19%), machinery and equipment, textiles and fabrics, vehicles, and agricultural products. The main import-supplier countries were China (approximately 24%), India (around 20%), the United Arab Emirates (around 7%), Japan (around 5%), and Singapore (around 5%).

Sri Lanka is a signatory of the Asia Pacific Trade Agreement (APTA), Global System of Trade Preferences among Developing Countries (GSTP), South Asian Free Trade Agreement (SAFTA) and related arrangements. The nation has signed free trade agreements (FTAs) with India, Pakistan and Singapore, and continues to pursue further trade facilitation and preferential arrangements.

Investment Opportunities

The Board of Investment of Sri Lanka (BOI) continues to promote structured investment opportunities across priority sectors. Pharmaceutical and active pharmaceutical ingredient (API) manufacturing remains a focus, with dedicated zones and facilities offering tax holidays, duty concessions, and other incentives for formulation, blending, packaging and related activities.

Tourism remains a central pillar of the economy and one of the largest foreign-exchange earners (earnings reached approximately US$3.2 billion in 2025). The government actively encourages investment in hotels, resorts, villas, eco-lodges, recreational and entertainment facilities, heritage tourism, and hospitality skills development, with a target of higher visitor arrivals and revenue in coming years.

Infrastructure and construction priorities include transport upgrades, port and airport development, logistics, and renewable energy. Agriculture, food processing and fisheries continue to seek investment for value addition, sustainable fishing, and agro-processing facilities.

Other priority areas include manufacturing (textiles, electronics/EV assembly, rubber products), ICT and data centres, urban and mixed-use developments, and related logistics. The BOI has highlighted a pipeline of project-ready opportunities valued in the billions of US dollars across these sectors, supported by improved macroeconomic stability and investment facilitation measures.