From Crisis to Comeback: How Climate-Smart Growth Can Power Sri Lanka’s Recovery

In April 2024, as a severe heatwave swept across Sri Lanka, temperatures climbed into the mid-30s °C. Malani, who lives in a small flat in Colombo, began leaving home earlier each day to avoid the worst of the midday sun. She works two part‐time jobs and walks across the city for her shifts — but the rising heat makes each step heavier. With the country recording close to 80 dangerously hot days that year, nearly double the global average of 41, Malani’s daily commute had turned into a quiet struggle against exhaustion.

For people like Malani, Sri Lanka’s climate challenge is not a distant policy headline. It’s here, in a hotter breath and slower step, shaping daily life and livelihoods.

From Economic Crisis to Climate Opportunity

Sri Lanka stands at a turning point. After facing one of the worst economic crises in its history – one that pushed many families in to poverty – the country has made remarkable progress. In just three years, Sri Lanka undertook one of the largest fiscal adjustments in its history – equal to nearly 8 percent of GDP. A turnaround that has been faster and sharper than many similar efforts worldwide.  

With this progress, Sri Lanka is now better positioned to shift its focus – from crisis management to building a future where economic stability, resilience, and sustainability go hand in hand. But as the economy finds its footing, another challenge looms large: the growing threat of climate change.

Turning Climate Risks into a Climate Comeback

Sri Lanka is already one of the world’s hottest countries, with average temperatures of 27°C and 28°C, and they are expected rise even higher. Extreme heat, floods, and droughts are affecting communities, jobs, and food production. Over the past 30 years, floods alone have caused an estimated US$240 million in damages every year.

Without strong action, climate-related losses could reach 3.5 percent of GDP by 2050 and push poverty rates up by nearly 2 percentage points —largely due to extreme heat and flooding.

Yet with urgent action, coupled with a coordinated set of reforms and investment, Sri Lanka can turn these risks into a powerful opportunity for the country to rebuild a more resilient, sustainable and inclusive economy that works for all Sri Lankans.

A Vision for Climate-Resilient Growth

As Sri Lanka rebuilds, the government has signaled a clear commitment to a low-carbon, climate-smart future. The recently launched National Climate Finance Strategy (2025-2030) outlines how Sri Lanka plans to attract investment for green infrastructure, sustainable agriculture, and better water management.

The World Bank Group’s Sri Lanka Country Climate and Development Report (CCDR) shows that investing in climate resilience isn’t just about protecting against disasters – it’s also smart economics. A series of “no regrets” investments can create jobs, strengthen growth, and reduce poverty, while preparing the country for a warmer, more unpredictable climate.

Three Priorities for a Resilient Future

The CCDR identifies three key areas that can shape Sri Lanka’s climate-smart growth:

    1. Building rural resilience and prosperity

Supporting farmers with climate-smart practices, modern irrigation systems, and access to new markets.

    2. Investing in livable cities

Expanding green spaces, improving public transport, and reducing pollution to make cities safer and more efficient.

    3. Expanding clean, domestic energy

Harnessing solar, wind and other renewable sources to lower energy costs, reduce dependence on fuel imports, and cut emissions.

These priorities align closely with Sri Lanka’s national plans, including the country’s Nationally Determined Contribution, National Adaptation Plan, and Climate Prosperity Plan.

Integrated Landscape Management

The CCDR also highlights the importance of integrated landscape management. This approach looks at interconnected systems—water, agriculture, forests, infrastructure, and tourism—as part of a single, holistic landscape.

By managing these systems together, Sri Lanka can strengthen climate resilience, protect its natural capital, and support inclusive economic growth. Integrated landscape management connects urban and rural areas, enhances ecosystem services, and ensures that investments in resilience benefit communities across regions and sectors. It is both an environmental imperative and a strategic opportunity to unlock new sources of long-term growth and stability.

Mobilizing Capital for Resilient Growth

With public resources constrained and the economy still recovering, public funds alone will not be enough to meet Sri Lanka’s climate and development goals. The Climate Finance Strategy outlines how to mobilize private capital and international investment through innovative tools such as green bonds, public-private partnerships, risk-sharing facilities, and carbon market mechanisms.

Between 2025 and 2053, Sri Lanka will need about US$220 billion—or roughly 4.3 percent of GDP each year—for “no regrets” investments that strengthen resilience and drive long-term growth. If well-sequenced and efficiently managed, this could offset up to one-quarter of potential climate-related losses by mid-century.

Climate Action: The Engine of Sri Lanka’s Prosperity

Sri Lanka’s recovery is still unfolding. The alignment of economic reform and climate ambition presents a rare opportunity: a chance not just to recover, but to transform. The country has a chance to manage climate risks while shaping a fairer, more competitive, and climate-secure future.

By accelerating its transition to clean, domestic energy, the country can reduce its dependence on fuel imports and lower energy costs for households and businesses. Investments in greener transport, urban cooling, and resilient storm-water systems can improve air quality, reduce congestion, and make cities safer and more livable.

In rural areas, scaling climate-smart agriculture, modern irrigation, and climate-resilient water systems can boost farm productivity, strengthen food security, and raise rural incomes, even as weather patterns shift.

These benefits are within reach. Taken together, they point to a future where climate action does more than protect Sri Lanka from shocks: it becomes the engine of long-term prosperity, inclusion, and shared opportunity.

Sri Lanka has proven it can act decisively in times of crisis. Now, it can channel that same determination toward building a resilient, green, and inclusive future for generations to come.