There is nothing inherently wrong with optimism. In a country that has endured economic collapse, political upheaval, and repeated shocks to public confidence, the instinct to look for silver linings is understandable. But optimism untethered from reality is more about denial than hope. It is precisely this dangerous conflation of positivity with progress that appears to be shaping the Government’s response to some of the most consequential economic challenges facing Sri Lanka today.
Nowhere is this more evident than in the official narrative surrounding the destructive aftermath of Cyclone Ditwah. Rather than confronting the full scale of destruction left in its wake, the regime has chosen to highlight the comforting but deeply misleading idea that the disaster could, in fact, be a ‘blessing in disguise’ because ‘reconstruction will stimulate economic activity.’ This argument, repeated with unsettling confidence, reveals a shallow understanding of growth, recovery, and long-term economic health.
Yes, reconstruction will create activity; contractors will be hired, cement and steel will be produced and sold, and GDP figures may receive a short-term bump. But this is only one side of the ledger. The funds required to rebuild roads, bridges, irrigation systems, and public infrastructure do not materialise from thin air. They will come from the same constrained public resources that were earmarked for new infrastructure, export-oriented development, and productivity-enhancing investments. In other words, money that should have been used to move the economy forward will now be spent merely to return it to where it was before the cyclone struck.
This distinction matters profoundly. After billions of rupees are poured into reconstruction, Sri Lanka will not possess new assets, new industries, or new competitive advantages. It will simply have restored what it already had. Short-term GDP growth generated by disaster recovery is not genuine development but more an accounting illusion that masks a depletion of future growth potential. Treating such ‘growth’ as evidence that ‘recovery is on track’ is not only naïve but also reckless.
This kind of primitive economic thinking where any uptick in GDP is celebrated as progress regardless of its source is precisely what led Sri Lanka into crisis before. The lesson of 2022 was not merely about foreign reserves or debt ratios, but also about the cost of mistaking activity for advancement. If the current National People’s Power (NPP) regime cannot distinguish between rebuilding lost capacity and expanding productive capacity, the country risks sliding back into the same chaos it only recently escaped.
The same flawed logic is also underpinning the Government’s near-religious faith in tourism as Sri Lanka’s economic saviour. Here too, the obsession is with appearances rather than outcomes, with near total focus on numbers rather than value. Tourist arrival numbers are being celebrated with increasing regularity and theatrical enthusiasm, while the far more important question of how much money those tourists actually bring into the country is being quietly pushed to the background.
Last week, tourism authorities were congratulating themselves over record arrivals. According to the Sri Lanka Tourism Development Authority, nearly 132,000 tourists arrived in the first 15 days of January 2026 alone, with a single-day peak exceeding 10,000 visitors. India and Russia emerged as the top source markets, together accounting for roughly one-third of total arrivals. Yet these are traditionally budget-conscious markets, yielding minimal foreign exchange per visitor. High-volume, low-yield tourism may inflate arrival statistics, but it does little to strengthen the balance of payments or support long-term economic stability.
The consequences of this mismatch between volume and value are already evident in the data. Sri Lanka fell short of its 2025 tourism earnings target by roughly $ 1.8 billion, achieving only $ 3.2 billion against an expected $ 5 billion, despite welcoming a record 2.36 million tourists. Even more troubling is that arrivals missed the Government’s own target by more than 600,000. Compared to 2024, the increase in arrivals was a modest 13.9%, while earnings barely grew.
Recent research by a leading equity firm paints an even starker picture. Between January and October 2025, tourist arrivals increased marginally, but tourism earnings contracted by nearly 25%. Expectations for both 2025 and 2026 have since been revised sharply downward. Sri Lanka’s tourism sector, which generated $ 4.4 billion in annual earnings in 2018, is struggling to cross $ 3.5 billion eight years later, despite significantly higher visitor numbers and significantly higher inflation in the ensuing period that has doubled prices.
This widening gap between arrivals and earnings is not an abstract statistical anomaly; it reflects a structural deterioration in the quality of tourism growth. Central Bank data shows that December 2025 marked the fourth revenue contraction within six months, even as arrivals continued to rise. Average daily spending per tourist has been drastically revised downwards from $ 171 to $ 148, rather than upwards as it should be, confirming what industry stakeholders have warned for months, that Sri Lanka is attracting more tourists who spend less, stay shorter, and contribute little to net foreign exchange earnings.
Besides, it can be argued that these budget tourists are more of a liability than an asset from a socio-economic perspective, as they consume local resources for their sustenance at great cost to the local community. For instance, the demand for food to feed these tourists will inevitably drive prices higher, posing a disadvantage to the local consumer, while little is added to the economy by way of forex value. Even this meagre forex income will likely be used for fuel imports to drive them around. The net value gain is therefore what needs to be looked at objectively, rather than celebrating arrival numbers.
At its peak, tourism accounted for nearly 5% of GDP. Today, after the Easter Sunday attacks, the pandemic, and the economic crisis, it contributes around 3%. Yet policymakers continue to speak as if tourism alone can generate the hard currency needed to service debt, stabilise the rupee, and finance development. This is merely wishful thinking, unless and until focus is shifted to the other extreme of the tourism source market.
Given this backdrop, the Government’s ambitions for 2026 of three million tourists and $ 5 billion in revenue are not only ambitious but internally contradictory, unless a fundamental shift in tourism quality occurs. To meet that target, Sri Lanka would need to increase arrivals by 25% and revenue by over 40% in a single year. That implies a sharp rise in average revenue per tourist and daily spending levels that current trends simply do not support. Without addressing product quality, pricing power, destination management, and market positioning, these targets amount to nothing more than numerology.
As if these internal vulnerabilities were not enough, new external risks appear to be looming on the horizon. The potential imposition of a 25% tariff by the US on countries trading with Iran as announced by Donald Trump last week introduces a new layer of uncertainty into Sri Lanka’s already fragile export landscape. Iran remains a key buyer of Sri Lankan tea and a major supplier of fertiliser. Any disruption to this relationship would have a cascading effect from export earnings to agricultural input costs and food prices.
Sri Lanka’s exports to Iran may appear modest in absolute terms, but in an economy starved of foreign exchange, no market is dispensable. A forced shift away from Iranian fertiliser would raise production costs, squeeze farmers further, and ultimately undermine food security. Yet the Government’s response to this looming threat has been disturbingly casual, marked more by diplomatic platitudes than contingency planning.
All of this points to the deeper and more uncomfortable truth that what is being presented as ‘stabilisation’ is, in reality, a holding pattern. The economy is not being restructured; it is being patched. Growth is being extracted from reconstruction, tourism volume, and temporary rebounds rather than from productivity, exports, and value creation. While debt remains high, vulnerability remains acute and resilience remains elusive.
Without a decisive shift towards a production-based, export-oriented economy, Sri Lanka’s perceived stabilisation will continue to remain fragile. Meanwhile, disasters will be reframed as opportunities, low-quality tourism will be celebrated as success, and warning signs will be dismissed as pessimism until the next crisis forces reality back into the conversation.
While optimism has its place, astute governance demands clarity. Unless the current regime learns to tell the difference between growth that looks good and growth that actually matters, Sri Lanka risks repeating the very mistakes that brought it to the brink just a few short years ago.