The national conversation about Sri Lanka’s future was always centred on its youth, their education, their jobs, and their departures. But the latest census suggests the story has changed. 

The island is greying faster than expected, and the economic implications are beginning to surface. Growth will depend less on numbers and more on productivity, in a country where both the tax base and the labour pool are quietly contracting.

Sri Lanka’s 2024 Census of Population and Housing confirms what economists and demographers have sensed for years. The island’s population is getting older faster than its economy can adapt. 

The share of citizens aged 65 and above has climbed to 12.6%, up from 7.9% in 2012. The child population has fallen to 20.7%. The working-age group, between 15 and 64, amounts to about two-thirds of the total. 

The end of the easy years

For decades, Sri Lanka enjoyed a demographic dividend; a majority of its citizens were young, working, and able to support both children and the elderly. That balance gave governments tax revenue and households breathing room. 

The new data show that this window has narrowed. The dependency ratio has risen to nearly half, meaning every two working adults now sustain one person outside the labour force.

The country’s economic structure hasn’t caught up with this change.

• The working-age population, once a source of growth, is beginning to contract.
• Labour migration has removed hundreds of thousands of skilled and semi-skilled workers.
• Productivity growth remains low, especially in sectors like construction, transport, and public administration.

Fewer workers means less income tax, weaker pension contributions, and lower domestic savings. 

The cost of care

Public pensions now absorb close to 10% of Government spending. The system is non-contributory. Each rupee paid to a retiree comes directly from current revenue. As more civil servants retire, the bill grows automatically.

The Employees’ Provident Fund and Employees’ Trust Fund cover fewer than one in five workers. Informal employment, from tuk-tuk drivers to vendors, makes up nearly two-thirds of the workforce and offers no protection in old age. In these homes, retirement depends on the family, but families are smaller than they used to be. The census shows the average household size shrinking from 4.3 to 3.5 persons in a decade.

Healthcare faces a similar strain. Longer life expectancy brings chronic illness. Hospitals see more patients for diabetes, heart disease, and kidney conditions, all of which demand lifelong treatment. 

Public health spending hovers near 1.5% of Gross Domestic Product (GDP), one of the lowest in Asia. Geriatric wards are scarce, and most care happens at home, usually unpaid. Women bear most of that work, leaving formal jobs to look after ageing parents. 

Uneven ageing

The grey wave is not spread evenly across the island. Colombo has the youngest profile, with a dependency ratio of 43%, while Matara’s stands at 55%. Districts in the south and hill country are ageing faster as younger residents migrate outwards. In some villages, schools have closed while elderly centres have opened in their place. 

These patterns echo a quiet migration within households too. Adult children move to cities, often renting small flats near work. Parents stay behind with diminishing income and rising expenses. 

Lessons from the region

In East Asia, ageing arrived later but on stronger foundations. Japan’s elderly share passed 12% when its per capita income had already reached $ 30,000. South Korea restructured its pension and health systems long before crossing that mark. 

Thailand, closer in income to Sri Lanka, has struggled more. Its elderly share has doubled in two decades, outpacing job creation and fiscal capacity. Economists there call it “growing old before growing rich,” a phrase that fits Sri Lanka precisely.

What separates success from strain is preparation. Japan invested early in automation and eldercare. South Korea built long-term care insurance funded through payroll. Thailand launched universal old-age allowances. 

Sri Lanka’s approach has been reactive, fragmented, and underfunded. The National Secretariat for Elders runs small programmes with limited reach. Attempts to create a contributory pension for informal workers have faltered. Private insurers cater mainly to urban elites.

The fiscal squeeze

Sri Lanka’s ageing population, slowing migration, and weak fiscal discipline are converging into what economists describe as a structural crisis. 

Advocata Institute Director Riyad Riffai said the country’s shrinking workforce and inefficient State spending were creating a long-term burden that higher taxes alone could not fix.

According to Riffai, the segment of the population most likely to have children has also been the group most likely to migrate in recent years. With fewer young workers and lower birth rates, the tax base that sustains pensions and healthcare is gradually eroding.

He pointed out that while Government agencies had reported record-high tax revenues, these funds had not translated into visible public investment or social infrastructure. 

“Revenue has gone up, but we haven’t seen new hospitals or a noticeable improvement in services,” he said. “Taxpayers are carrying a heavier load to maintain loss-making State enterprises and an expanding public sector.”

Riffai drew parallels with Japan and South Korea, which also face ageing populations, but said those countries were equipped with wealth, technology, and strong institutions that Sri Lanka lacked. “They can turn to automation and robotics to maintain productivity,” he noted. “We don’t even have the basic fiscal capacity to manage the costs of ageing.”

He added that Sri Lanka’s ageing population was not in itself a problem, since people were living longer thanks to a relatively robust healthcare system, but noted that the lack of efficiency and accountability in State spending made the situation economically precarious.

Riffai insisted that the solution lay in economic reform rather than new taxes or stopgap welfare measures. He argued that Sri Lanka must reduce the size of its State sector, divest loss-making enterprises, and allow the private sector to operate more freely.

He said the migration slowdown seen this year did not signal recovery. Instead, he warned, it masked a deeper demographic imbalance. “The youth are still trying to leave,” he said, referring to the long queues at the passport office. “It’s just that destination countries are taking fewer workers now.”

Riffai added that this steady outflow of working-age citizens compounded the pressure on those who remained, since the State’s financial obligations, such as pensions, healthcare, and salaries, continued to expand regardless of how many taxpayers were left.

A holistic approach 

University of Colombo Department of Economics Senior Lecturer Dr. Shashithanganee Weerawansa identified multiple economic and fiscal challenges stemming from this significant demographic transition, especially the declining working age population. 

These include slow labour force growth; higher dependency ratios; pressure on pension, healthcare, and social welfare systems; and a potential decline in production and savings.

On healthcare, she highlighted the significance of people taking immediate preventive health measures so that, in the long run, it might be possible to provide solutions to future health costs to a certain extent.

Addressing the negative impact on savings, she added that living off savings alone would drain them faster, and thus, the concept of not engaging in any work following retirement would not be a positive approach.

Given the heightened life expectancy levels, Dr. Weerawansa noted that the retirement age could perhaps be adjusted, whenever appropriate. However, she pointed out the need to also address efficiency-related issues entailed by an ageing population, with effective technology adoption, such as Artificial Intelligence.

“People need to be financially empowered to look after themselves, especially their health. I don’t think that the ageing population is a burden; rather, it is an asset, as these are human resources, although the skill set usually changes from technical to conceptual. However, at any age, not making rightful use of people who can contribute to the economy is a substantial burden to any country. Therefore, unemployment in all its forms should not be looked at as a burden by a government.”

Instead, she emphasised the need for the Government to utilise these human resources to be gainfully occupied. Many people opt for Government jobs for long-term stability. However, she noted the need for a productivity-based mechanism, adding that how people were approached beyond the so-called employable age should be harmonised, whether in the private or public sector, minimising or abolishing the disparities.

“This does not apply to those who genuinely cannot fend for themselves for various legitimate reasons, and welfare programmes should be in place for them. However, people who can make a contribution, irrespective of age, must be utilised for their own betterment and for national economic growth,” she said.

Dr. Weerawansa also highlighted the need for improving Sri Lanka’s female labour force participation, ensuring a conducive environment by introducing necessary facilities, such as childcare support, flexible working hours, part-time options, social protection, and curbing workplace discrimination. She noted that improving female workforce participation was an immediate solution to these demographic changes, especially the ageing population.

“All approaches must be perceived holistically. It is important to activate all workers, gradually raise the statutory retirement age in line with life expectancy, support the transition to perhaps part-time or consultancy roles, and incentivise employers to retain experienced staff. Moreover, lifelong learning and reskilling should be encouraged,” she added.

Adapting to longevity

Creating flexible work for older adults could keep experienced workers active longer. Investing in preventive healthcare would cost less than chronic disease management later. Technology can help, but only if adopted beyond city centres.

Policymakers will also need to rethink education and labour training for a smaller youth cohort. With fewer new workers entering the market, each must be more skilled. Productivity, not population, will determine future growth.

None of this will be easy in a country still recovering from economic collapse. But if policy continues to lag behind the population it serves, the next generation will inherit both the debt of its elders and the duty to care for them, with fewer hands to share the weight.