Nearly a decade after 2016, are Sri Lankan households truly better off? The answer, according to newly released preliminary results of the Household Income and Expenditure Survey (HIES) 2025, is far more complicated than rising nominal figures might suggest. Despite what appears to be substantial growth in household earnings on paper, the reality for most Sri Lankan families tells a sobering story of stagnation, inequality, and lost economic opportunity.
What the HIES 2025 Data Reveals
The HIES 2025 preliminary findings, analyzed by Dr. Pulasthi Amarasinghe, Research Fellow at the Institute of Policy Studies of Sri Lanka (IPS), offer a critical lens through which to evaluate household welfare over the past decade. While nominal incomes have risen considerably since the 2016 survey, these gains must be measured against the backdrop of severe inflation, economic crisis, and structural vulnerabilities that have defined Sri Lanka's recent history.
When adjusted for inflation and real purchasing power, the picture shifts dramatically. The typical Sri Lankan household has not experienced meaningful income growth in real terms. In fact, for a significant portion of the population, real incomes have either stagnated or declined — a defining characteristic of what economists are now calling Sri Lanka's "Lost Decade."
Nominal Gains vs. Real Purchasing Power
One of the most critical distinctions in understanding household welfare is the difference between nominal and real income. Nominal income refers to the raw rupee amount a household earns, while real income accounts for what that money can actually buy after inflation is factored in.
Sri Lanka experienced devastating inflation in the years following 2019, culminating in the catastrophic economic crisis of 2022. Food prices skyrocketed, fuel costs surged, and essential goods became increasingly unaffordable for middle and lower-income households. Even as wages nominally increased, the cost of living outpaced those gains for millions of families across the island.
This erosion of purchasing power is central to understanding why the decade between 2016 and 2025 represents not a period of progress, but one of profound economic loss for a large segment of Sri Lanka's population.
A Decade of Diverging Incomes
Perhaps the most alarming finding embedded in the HIES 2025 data is the widening gap between income groups. While higher-income households have managed to protect and even grow their real wealth — through assets, investments, and access to foreign remittances — lower and middle-income households have borne the brunt of economic shocks.
This divergence reflects deeper structural inequalities within Sri Lanka's economy. Access to quality employment, education, healthcare, and financial services remains unevenly distributed across income brackets, geographic regions, and demographic groups. Rural households, in particular, have faced compounding challenges including agricultural disruptions, reduced government subsidies, and limited access to formal financial systems.
The result is a society where economic recovery, to the extent it has occurred, has not been shared equitably. The benefits of any growth have disproportionately flowed toward those already positioned at the upper end of the income spectrum.
The Human Cost Behind the Statistics
Behind every data point in the HIES 2025 survey is a household making difficult choices. Families cutting back on nutritious food, parents unable to afford private tuition for their children, workers accepting informal employment with no job security — these are the lived realities that aggregate income statistics can obscure.
Sri Lanka's economic crisis of 2022, which saw foreign reserves collapse, fuel queues stretch for miles, and essential medicines disappear from shelves, left lasting scars on household finances. Many families depleted savings, took on debt, or sent members abroad in search of income. The recovery since then has been uneven, and the HIES 2025 data confirms that the wounds have not fully healed.
Policy Implications and the Road Ahead
The findings from HIES 2025 carry urgent policy implications for Sri Lanka's government and development partners. Economic recovery strategies must move beyond macroeconomic stabilization and GDP growth targets to explicitly address household-level welfare and income inequality.
Targeted social protection programs, investment in rural economic development, strengthening of labor market protections, and improved access to affordable healthcare and education are among the priority areas that policymakers must address to ensure that the next decade does not repeat the failures of the last.
Dr. Amarasinghe's analysis serves as a timely reminder that economic data must be interpreted through a human lens. Numbers alone do not capture the full extent of hardship or resilience experienced by Sri Lankan households over the past ten years.
Conclusion
Sri Lanka's Lost Decade is not merely a phrase — it is a measurable reality reflected in the diverging fortunes of its households. The HIES 2025 preliminary results provide both a mirror and a mandate: a mirror reflecting a decade of missed opportunities and growing inequality, and a mandate for policymakers to chart a more inclusive, equitable path forward. The question now is whether Sri Lanka's leaders will heed the data and act decisively before another decade slips away.