In April 2024, Sri Lanka experienced a severe heatwave, with temperatures soaring into the mid-30s °C, affecting daily life for residents like Malani in Colombo. Working two part-time jobs and navigating the city on foot, she faced the physical strain of extreme heat, highlighting how climate change is already shaping livelihoods and routines across the country. With nearly 80 dangerously hot days that year, far above the global average, the impacts on daily life were immediate and personal.
Sri Lanka is at a pivotal moment, having recently emerged from one of its worst economic crises. Over three years, the country executed a substantial fiscal adjustment equivalent to nearly 8 percent of GDP, laying the groundwork for stability. This recovery positions Sri Lanka to shift focus from crisis management to sustainable growth, though the country now faces escalating climate risks, including extreme heat, floods, and droughts, which threaten communities, agriculture, and overall economic stability.
Climate-related damages are significant, with floods alone causing an estimated US$240 million annually over the past three decades. If left unaddressed, climate risks could cost the country up to 3.5 percent of GDP by 2050 and increase poverty rates. However, coordinated reforms and targeted investments in climate resilience offer an opportunity to transform these risks into drivers of sustainable, inclusive economic growth.
The government has outlined a clear commitment to a low-carbon, climate-smart future through the National Climate Finance Strategy (2025-2030), aiming to attract investment for green infrastructure, sustainable agriculture, and improved water management. According to the World Bank Group’s Sri Lanka Country Climate and Development Report (CCDR), strategic climate investments—termed “no regrets” actions—can protect against disasters while generating jobs, promoting growth, and reducing poverty.
The CCDR highlights three priority areas for climate-smart growth: building rural resilience through modern irrigation, climate-smart agriculture, and market access for farmers; investing in livable cities by expanding green spaces, improving public transport, and reducing pollution; and expanding clean domestic energy via solar, wind, and other renewables to cut emissions and energy costs. These priorities align with Sri Lanka’s broader national plans, including its Nationally Determined Contribution, National Adaptation Plan, and Climate Prosperity Plan.
Integrated landscape management is emphasized as a holistic approach, connecting water, agriculture, forests, infrastructure, and tourism. This strategy strengthens climate resilience, protects natural resources, and supports inclusive economic development across regions. By managing these interconnected systems together, Sri Lanka can enhance ecosystem services and ensure long-term benefits for communities.
Mobilizing sufficient capital is crucial, as public resources alone cannot meet the country’s climate and development goals. The Climate Finance Strategy proposes leveraging private and international investment through green bonds, public-private partnerships, risk-sharing mechanisms, and carbon markets. Sri Lanka will require approximately US$220 billion between 2025 and 2053 for resilience-building investments, which could offset a significant portion of potential climate-related losses.
Aligning climate action with economic recovery offers Sri Lanka a unique opportunity to not only mitigate risks but also drive inclusive prosperity. Investments in clean energy, resilient urban infrastructure, and climate-smart agriculture can reduce costs, strengthen food security, create jobs, and improve living conditions. By taking decisive climate action now, Sri Lanka can transform vulnerability into opportunity, fostering a resilient, green, and inclusive future for generations to come.
