As Sri Lanka continues to grapple with high poverty rates, its social protection mechanisms struggle to keep pace, highlighting the risks to its progress in poverty alleviation.
Since 2022, Sri Lanka’s poverty line has been on a steep upward trend, standing at Rs. 13,777 in December 2022 and reaching Rs. 15,970 by January 2023, then rising to Rs. 17,014 in January 2024 and dropping slightly to Rs. 16,334 in January 2025. As per the latest update for March 2025, the poverty line stands at Rs. 16,302.
According to the World Bank, the poverty rate was 24.5% (at $ 3.65 per person per day) in 2024. Although poverty declined marginally during the year, it remained nearly double what it was in 2019 (11.3%). Sri Lanka’s household incomes are also well below pre-crisis levels, while vulnerability has also increased, with a third of Sri Lankans living in poverty or one shock away from falling back into it.
While poverty is expected to decline to 22.7% in 2025 and remain around 20% in the medium term, under current projections, the economic crisis is expected to have reversed a decade of poverty reduction.
With the poverty line having remained at fairly consistent highs and showing no improvement for the past few years following the crisis, Uva Wellassa University of Sri Lanka Faculty of Management and Centre for Poverty Analysis (CEPA) Associate Prof. N.P. Ravindra Deyshappriya noted that poverty rates had risen in spite of changes throughout time reflecting changing economic situations.
“According to the World Bank, the percentage of Sri Lankans living in poverty increased from 3.2% in 2019 to 25.9% in 2023. The impact of economic difficulties, such as inflation and declining purchasing power, is reflected in this increase.
“Even if the official definition of poverty has been revised to reflect current economic conditions, the ongoing increase in poverty rates highlights the necessity of extensive social safety nets and economic changes to tackle the root causes of poverty in Sri Lanka,” he said.
According to Prof. Deyshappriya, the factors that are most responsible for poverty at present are inflation and rising cost of living, unemployment and labour market challenges, income inequality, debt burden and fiscal constraints, social protection gaps, and structural economic issues.
Welfare measures inadequate?
The World Bank notes that a more pro-poor economic recovery, in which economic growth translates into higher rates of growth in household income among less well-off households, could help bring poverty rates back to their pre-crisis levels before 2030.
Similarly, in a pre-crisis study (World Bank Sri Lanka Poverty Update 2021), among key focus areas identified to accelerate job creation and poverty reduction, stronger safety nets are highlighted as a priority to protect the poor and vulnerable, pointing to the need to ensure that social protection programmes are better targeted to further reduce poverty.
While efforts to build better targeting and delivery systems and strengthen graduation programmes can go a long way towards supporting the poor, the success of Sri Lanka’s existing social protection mechanism remains questionable given the evidence of its poverty rates.
As Prof. Deyshappriya noted: “Sri Lanka has been practising different kinds of social protection programmes since independence and later such programmes were one of the key components of political propaganda.”
Nevertheless, as he pointed out: “Such social protection programmes have not been adequately successful in alleviating poverty in Sri Lanka and consequently poverty is still a dramatic development issue in the country. Hence, social protection programmes are historically recognised as political strategies which have been used to win the favour of lower-income groups during elections.”
He further pointed out that while welfare measures had resulted in a positive impact on poverty reduction, their effectiveness had been hindered by issues related to coverage, targeting, and adequacy.
“Recent reforms, such as the introduction of the ‘Aswesuma’ programme and the Welfare Benefits Information System (WBIS), represent steps towards addressing these challenges. However, sustained efforts are necessary to enhance the efficiency and reach of social protection systems to effectively alleviate poverty,” he said.
He noted that some of the key shortcomings in current welfare programmes that prevented them from effectively reducing poverty levels included poor targeting of beneficiaries, limited coverage, inadequate benefit amounts, fragmentation of programmes, weak administrative systems, political interference, and lack of integration with economic empowerment.
Impact of social protection
Nevertheless, despite their questionable efficacy, social protection programmes are crucial given Sri Lanka’s current situation, with even international organisations such as the International Monetary Fund (IMF) and the World Bank highlighting their necessity.
Prof. Deyshappriya therefore stressed that it was essential to implement appropriate social protection programmes in order to ensure a better living standard for lower-income groups suffering from the pandemic and current economic unrest.
As such, Table 1 shows recent estimates by the Department of Census and Statistics (DCS) of the impact of social protection programmes on poverty in Sri Lanka.
Prof. Deyshappriya noted: “According to estimated impacts, social protection programmes have reduced poverty from 7.9% to 3.2% under the old poverty line and from 20.5% to 14.3% under the new poverty line. Hence, Sri Lanka’s poverty figures could have increased by 6.2% (under the new poverty line) in the absence of social protection programmes.
“In particular, the impact of the pension scheme on poverty is more substantial and the poverty headcount index could have increased up to 16.7% unless the pension scheme had been implemented.
“Apart from that, poverty rates could have increased up to 15.9%, 14.7%, and 15.1% under the new poverty line in the absence of the ‘Samurdhi’ programme, payment for the elderly, and the fertiliser subsidy, respectively,” he said.
Meanwhile, speaking to The Sunday Morning, Deputy Minister of Rural Development, Social Security, and Community Empowerment Wasantha Piyathissa said that the Government considered poverty as a significant concern, noting: “With the recent economic collapse, industry, agriculture, and jobs collapsed. We are making a considerable effort to rebuild things while providing relief to low-income earners.”
“Alongside lowering prices of essentials, the Government has increased the ‘Aswesuma’ benefit as well as the number of beneficiaries, since we will be adding 400,000 beneficiaries this year,” he said, pointing to the increased welfare allocations as well as the expansion of the numbers of those receiving various other welfare benefits such as those for the elderly and individuals with disabilities as measures by the Government to facilitate welfare.
He also pointed out that in terms of rural welfare, a programme was underway to empower 2,000,000 rural families over the next five years, with action ongoing to identify suitable families in the villages. He noted that a significant sum had been set aside for each family, with special intervention to improve their income.
Poverty line outdated?
In this context, there is a question as to whether the current poverty line adequately represents the minimum acceptable standard of living for the poor, and provides a reliable and realistic metric to assess poverty in today’s socio-economic context.
The World Bank notes that most countries respond to welfare progress over time by periodically revising their poverty line, both to reflect changing consumption patterns as living standards rise and to redefine the basic standard of living for the poor.
However, according to Prof. Deyshappriya, the present Official Poverty Line (OPL) in Sri Lanka has several inbuilt weaknesses and hence does not reflect the real poverty status of Sri Lanka.
Firstly, the narrow definition of poverty means that the OPL is based mainly on minimum calorie consumption and basic non-food needs, which excludes other critical dimensions of poverty (e.g. education, health, housing, sanitation, and vulnerability to shocks). “It doesn’t account for social exclusion, indebtedness, or access to public services – all crucial elements of poverty in the current context,” he pointed out.
Secondly, due to the low threshold, the OPL may underestimate actual deprivation because it reflects only the cost of bare survival, not a decent standard of living. Prof. Deyshappriya noted: “For example, even after recent adjustments, many economists argue that the poverty line remains below the level needed for a household to live with dignity in urban or inflation-affected areas.”
Thirdly, it fails to capture the impact of inflation accurately. “While the OPL has been revised upward (e.g. rising from Rs. 6,966 in 2019 to Rs. 17,014 in 2024), the adjustments often lag behind real-time inflation, especially during economic crises like the 2022-2023 period. The delay in updates leads to an understatement of poverty during high inflation periods,” he observed.
Fourthly, it excludes vulnerability and transient poverty. Prof. Deyshappriya said: “Many households hover just above the poverty line and fall below it during economic shocks (e.g. job loss, illness, and inflation spikes). The OPL does not capture this ‘near-poor’ or vulnerable population, even though they face similar hardships.”
And finally, the mismatch with multidimensional poverty means that the Multidimensional Poverty Index (MPI), which includes health, education, and living standards, often reveals higher and more accurate levels of poverty than the income-based OPL.
Ultimately, better data and estimates will enhance our understanding of the patterns of poverty and vulnerability, and thus help in devising better interventions as well as help reflect the true extent of poverty and vulnerability.
