While 5 percent GDP growth in 2024 exceeded expectations, Sri Lanka’s investment climate remains challenging, according to the US Statement Department.

While the sweeping electoral victories of President Anura Kumara Dissanayake and the National People’s Power (NPP) parliamentary coalition in late 2024 have provided political stability, in the 2025 Investment Climate Statement on Sri Lanka, the US State Department said NPP’s commitment to the country’s US$3 billion, four-year (2023-2027) Extended Fund Facility IMF program reassured investors, but many remain wary given the NPP leadership’s historically anti-Western, Marxist-influenced ideology.

The report said foreign direct investment (FDI) remains constrained, with most transactions in the modest US$3 to US$5 million range.

The US State Department noted that despite the government’s US$5 billion FDI target for 2025, experienced investors emphasize that policy stability, regulatory reform, and improved transparency must precede any significant uptick in large-scale investments.

It added the new government’s institutional capacity to encourage an open investment environment remains limited despite positive rhetoric.

Overall, the US State Department said investors report that doing business remains difficult, frequently citing concerns about project reversals, regulatory shifts, slow decision making, and inadequate support for established businesses.