• Food staples, public transport, utility bills remain high
• Education, private healthcare remain overpriced

Despite fuel price reductions and increments approved for welfare schemes over the last year, the cost of living for the common man remains unbearable.

The prolonged effect of such austerity has led to many questions about why the Government has failed to provide the relief it promised, while seeking clarity about the State’s plans to address the issue. 

Following the double whammy of the Covid pandemic and the economic downturn, many Sri Lankans have been pushed below the poverty line, with large communities of urban poor unable to put food on their plates during most weeks.

Sri Lanka’s cost of living in 2025 reflects a nuanced economic phase marked by both challenges and gradual stabilisation. After the extreme inflation peaks during the 2022 economic crisis, the country experienced broadly deflationary monetary policies through 2023 and early 2025, which brought down prices and provided some respite to the general population.

However, the Central Bank of Sri Lanka (CBSL) projects a rise in the cost of living in the second half of 2025 as inflationary pressures re-emerge, marking a cautious transition from deflation back towards moderate inflation targets.

The deflationary environment of early 2025 was largely driven by supply-side factors, including currency appreciation policies that helped lower the prices of traded goods and energy. This strategy deviated from typical International Monetary Fund (IMF) programmes, which usually trigger currency depreciation. 

The Central Bank’s objective has been to keep inflation within a controlled range of 5-%, acknowledging that some level of inflation is sometimes viewed as necessary for economic growth in modern monetary theory.

Some of the key sectors driving the cost of living include essentials such as food, fuel, housing, utilities, and transportation. Small traders, the informal labour force, daily wage earners, and consumers are particularly vulnerable to price increases due to taxation policies and supply chain disruptions.

Food and groceries

Food remains one of the biggest expenses for many families. According to CBSL data, by 2025, prices of staple foods had mostly steadied compared to the sharp spikes seen in 2022. Yet, seasonal shortages, transportation costs, and high prices for imported items like fertilisers and fuel have caused some vegetables, dairy products, and imported foods to stay unpredictable in price.

Shoppers have responded cautiously buying cheaper vegetables, smaller amounts, and relying more on homegrown produce when they could. Official figures show small month-to-month price changes through 2025, but people’s everyday experiences vary depending on where they live and the season.

K.J. Sujith (37) from Kotahena, speaking to The Sunday Morning, said that the cost of living, especially when it came to food, was unbearable at present.

“I don’t believe any government will be able to fix the issues we are facing when it comes to daily expenses. Everything is so expensive, from rice to milk powder and eggs. We can’t even drink tea like we used to because that is also expensive now,” he lamented.

Sujith, who had to resort to becoming a delivery rider following the economic collapse, said that he was unwilling to get married as he did not believe he could provide for a family.

“How can I raise children in my current financial state? I do not want my children or wife to suffer simply because I cannot provide for them and that is why I remain unmarried even at 37,” he explained. Sri Lanka has an ageing population, with concerns growing about a downturn in its birth rate over the last few years.

Twenty-seven-year-old Hasni, an expectant mother, told The Sunday Morning that she feared being unable to provide for her child next year. “Both my husband and I work. Once I have a child, I may have to give up my job for a few years. Paying rent, looking after the baby, and managing the household are serious concerns for us. Given our pay, we can save only a little. If the prices of food and healthcare don’t come down, I worry about how we can manage. I may have to return to our village and stay with my parents for some time,” she said.

Electricity and fuel

Energy prices have been unpredictable. Changes in hydro and coal power availability, fuel import costs, and Government decisions on tariffs have all influenced the cost of electricity and petrol. Despite improvements to the energy sector, energy bills remain a concern for the public.

In both 2024 and 2025, policies aimed to stabilise or sometimes cut prices, but fuel remains a heavy burden for people commuting and for small businesses that use diesel. When tariffs or fuel prices drop, it gives households some relief, but this is balanced by the financial strain on State energy companies.

“Transport costs affect every aspect of our lives even if we don’t expect it. I had to incur certain losses at my shop because the supplier increased the delivery cost of goods earlier this year. I’m unable to pass it on to the customer as it would be too much for them to afford, so I have to suffer that loss in profit,” H.M. Abeyratne (65), a grocery store shopkeeper in Nawala, told The Sunday Morning.

He opined that the Government should introduce fixed prices for certain items and reduce fuel costs.

“We have heard this Government, when in the Opposition, say that fuel costs were inflated to generate profits for corrupt individuals. But now, they are in power, but fuel prices are still very high. I don’t know who to believe. Rice and milk powder should have price limits on them. These are essential for almost everybody, especially families with children,” he said, expressing disappointment with the lack of relief.

Private healthcare and schooling 

Private healthcare and private schooling continue to be a major expense for middle- and lower-middle class families.

A mother of two, Wasanthi Kumari (38) said that education costs were a heavy financial burden on her family.

“Books and stationery items increase in price all the time and at the beginning of each year we spend so much to buy the children what they need,” she said, adding that private tuition fees too were unjustifiably costly.

“These tuition teachers are charging obscene amounts from students, especially those who do group classes. They are millionaires, but as teachers, shouldn’t they think about the students? The Government must intervene as this has become a business for them now, instead of something being undertaken for the purpose of educating our children,” Kumari, whose eldest is to sit her O/Level Examinations next year, lamented, questioning why the Government did not regulate the tuition classes.

Although public services bounced back after the peak of the crisis, many still choose private clinics and schools. This means out-of-pocket expenses remain a significant part of monthly budgets.

President Dissanayake’s 2026 Budget introduces a range of measures intended to support living standards and ease cost-of-living pressures, though it has also been criticised for intensifying austerity in certain areas.

Tax changes and revenue measures

The 2026 Budget proposes various tax changes to widen the tax base and increase revenue. This includes updates to corporate and individual taxes and new import restrictions to both raise funds and encourage local production. Some measures target higher earners or luxury imports, while others may result in higher prices for everyday items. Budget 2026 summaries from KPMG Sri Lanka mention improvements in capital allowance thresholds for Small and Medium Enterprises (SMEs) to stimulate investment and job creation. 

If indirect taxes on common goods rise, everyday prices could go up, while narrowing tax breaks on luxury goods mainly affects wealthier groups. The Government aims to increase revenue-to-Gross Domestic Product (GDP) smoothly with a fairer tax system, easing the burden on low-income groups while asking more from those with higher incomes. 

Welfare schemes

Meanwhile, Fathima Rufaiq (78) said that while they were not looking for handouts, Government welfare schemes provided much needed relief. 

“I have worked all my life doing various jobs. Right now, I work as a housemaid, and we have never asked for charity. Welfare schemes are there to help people who are unable to earn enough to survive the week.” 

Rufaiq, who resides at the Dematogoda Government-built housing complex, said that the current welfare programmes were inadequate. “You can name it ‘Samurdhi,’ you can name it ‘Aswesuma’ – all we know is that it is not enough. We are barely making ends meet. Even with my daily wage it is not enough on some days,” Rufaiq said. 

In addition, the Budget mentions updating financial support and targeting subsidies to those who need them most, instead of across-the-board subsidies. In earlier years, the Government cut tariffs when possible; now in 2026, the plan is for steady and predictable pricing for utilities. 

Transparent, stable pricing reduces sudden bill shocks. If the Government delivers targeted subsidies and gradual tariff increases, many people may avoid large electricity bill hikes. But cutting subsidies without protection could hurt poorer families badly. 

Budget 2026 emphasises safety nets and help for vulnerable groups, increasing funds for social programmes and supporting export sectors and small businesses that generate jobs. The Budget highlights extra funding for groups like the Export Development Board and other targeted initiatives. 

As such, well-planned cash transfers, food aid, and subsidised services can provide vital relief for families struggling to make ends meet. The effectiveness depends on reaching the right people on time.

The Budget offers incentives for investment and support to SMEs, including lowering the investment threshold for tax allowances to encourage more businesses to invest and expand. KPMG notes this could boost hiring and wages over time. 

If successful, these measures can improve employment opportunities and increase household income, strengthening buying power in the medium term.

Ranjan Sivalingam (33), who has recently started an e-commerce startup, is however wary of the Government’s taxation policies. 

“I’m a small business owner. Increasing and/or widening the tax brackets impact us heavily. We don’t start with massive funding or capital like other businesses do. We have to take loans and repay them,” he said. 

Targeted relief

At the same time, the Budget offers targeted relief and development programmes, particularly focused on housing, welfare, and employment, aiming to benefit the poorest and most affected groups. 

Housing investments include Rs. 15 billion for urban regeneration projects in Colombo and suburbs, Rs. 10.2 billion for low-income housing schemes, and support for estate worker housing with assistance from the Government of India. 

Daily wages for plantation workers are set to increase from Rs. 1,350 to Rs. 1,750 by January 2026, with the Government subsidising part of the raise. 

Employment opportunities are to be created through recruitment of 75,000 new public servants in law enforcement, revenue collection, and technical roles, aiming to address unemployment pressures. However, economists have raised questions about the already massive State sector being further expanded, when IMF bailout plans indicate that the State sector should be streamlined.  

Provisions to support SMEs include Rs. 5.9 billion in loans and Rs. 800 million allocated for a sustainable agricultural loan fund targeting farmers. 

Efforts to digitise Government payments with no fees on small QR transactions and issuance of digital ID cards aim to increase financial inclusion and reduce transaction costs.

Call for price controls

Meanwhile consumer rights activist Asela Sampath said that spare parts prices had had a trickledown effect on many other essential items.

“One of the main items affecting cost of living across the board due to high prices are spare parts. But no one is talking about this. Spare part prices impact the cost of a range of essential goods like simple electronic items, school supplies, stationery items, etc.” 

He also charged that the private healthcare system was fast becoming a burden on the masses.

“Other essentials that are too costly are coconuts, coconut oil, and other coconut products, along with eggs, rice, and fish. Prices of pharmaceutical items are also extremely high in private pharmacies. For example, a common medicine used by those with diabetes – metformin – will have five different prices if you go to five different pharmacies while the price at a State Pharmaceuticals Corporation (SPC) outlet will be around half that,” he charged. 

He pointed out that medicines for noncommunicable diseases appeared to be those that were seeing high prices. 

“A single test strip used for monitoring blood glucose levels of diabetes patients is Rs. 112. A diabetes patient needs to check his blood glucose levels at least twice a day. That is roughly Rs. 1,500 a week for just the strips alone. Medicines for noncommunicable diseases are particularly susceptible to being unfairly priced higher and a lot of these medicines are needed by the elderly and infirm.” 

He urged the Government to introduce a price ceiling and control mechanisms on medicines. 

“We call on the Government to impose price controls on certain items. It is essential that control prices are imposed for spare parts. Similarly, certain essential medicines like diabetes medicines should have price ceilings to ensure they are accessible to all consumers, because not everyone will have access to SPC pharmacies all the time.”

PHOTO VENURA CHANDRAMALITHA