All Roads to Tourism

Surpassed the 2018 peak for the first time. Robust momentum carried over from 2024's recovery year.

Despite arrivals at record highs, earnings remain $1.16 bn below 2018's peak. CBSL flags this divergence as a structural concern requiring high-value tourist diversification.

SLTDA revised the figure down mid-year, from $171.74 (Jan–Jul) to $148.26 from August 2025, based on the Departing Survey. The mechanical driver of the arrivals-earnings gap.

Down from 10.8 nights in 2018. Combined with weaker daily spend, this is the second mechanical driver of the yield problem.

New scheduled operations, charter flights, and increased frequency drove the year. Air freight, in contrast, declined 3.4%.

Direct arrivals from the Middle East are modest, but Middle Eastern carriers ferry over 30% of total tourists into Sri Lanka via transit. Airspace constraints could hit total arrivals, even from European source markets.

The government completed restructuring of SriLankan's $175 mn government-guaranteed bonds in March 2026, removing a long-standing financial constraint on the national carrier.

CBSL approved partnership with AliPay+ in Feb 2025, joining existing India UPI and China UnionPay connectivity. Volume of tourist QR payments rose 185%.

One of the fastest-growing services sub-sectors in real terms. Up from Rs. 706 bn in 2024. A meaningful contributor to overall services growth of 3.3%.

During 2022–23 this category was among the most intense red zones in the inflation heatmap. By end-2025 it had returned near the green/target band, a normalised pricing environment.

Growth of 9.2% in 2025 (after 20.1% in 2024). Resumption of stalled projects supports new hotel and resort builds; the bigger driver of growth was post-Cyclone reconstruction expectations.

Tariffs cut by an average of 20% in January, raised 15% in June, with a further 10.3% increase effective from April 2026. CEB still recorded a Rs. 38.7 bn loss in 2025; more hikes likely.

Through 2025 prices declined gently. Then in March 2026: Petrol 92 jumped Rs. 293 → Rs. 398, Auto Diesel Rs. 281 → Rs. 382 due to the Middle East war. A QR-code fuel quota system was reinstated.

Dairy product imports surged 49.1%; oils & fats +44%; seafood +13.8%. Hotels with international F&B standards face the dual pressure of imported food inflation and a weakening rupee.

Public sector salary revisions and private minimum wage adjustments in 2025. Formal-sector wage growth was more pronounced after the 2022–23 inflation episode. Tourism is wage-intensive (housekeeping, F&B, drivers, guides).

Full-year impact of the 15→18% VAT rate hit in 2025. Registration threshold cut from Rs. 80 mn to Rs. 60 mn, pulling more SMEs into the net. VAT revenue +33.4% to Rs. 1,747 bn.

Introduced 1 April 2025 explicitly named in the report. Whether tourism services to foreign tourists qualify as "export of services" depends on tax interpretation, a meaningful policy ambiguity for the sector.

Import restrictions lifted Jan 2025. Personal vehicle imports surged from $66 mn to $1,607 mn. But excise duty surged 706%, so fleet upgrades are possible but expensive. Plus 20% CID + 50% surcharge on motor vehicles.

A unified regulator now licenses and supervises casinos and betting. Replaced three older pieces of legislation: the Betting on Horse Racing Ordinance, the Gaming Ordinance, and the Casino Business (Regulation) Act, No. 17 of 2010. Material for casino tourism segments.

UDA's tourism promotion & city branding programme transforming Kataragama, Kandy, and Anuradhapura into "model cities." The Clean Sri Lanka programme funds sanitary facilities at tourist destinations.

Total private-sector credit grew Rs. 2.1 tn, the largest expansion on record. But credit specifically to tourism contracted. Striking, given CBSL talks the sector up. Likely legacy NPL drag from the crisis years.

Overnight Policy Rate 8.00% → 7.75%. Average Weighted New Lending Rate 10.77% → 10.69%. Marginally favourable for new hotel/resort investment, but not transformative.

Launched May 2025 with IFC support. Green Finance Taxonomy under update. Could enable green/eco financing for tourism, with significant headroom from the current 2% sustainable lending share.

Rooftop solar accounted for nearly 9.4% of total electricity generation in 2025, with the report noting "rapid investments" driven by the cost-reflective tariff regime. A direct hedge for hotels against electricity tariff volatility.

The rupee depreciated 5.6% during 2025 to Rs. 309.99 per USD, ending two years of appreciation. The slide has continued in 2026: by late April it had touched the 12-month high of Rs. 317.41 (19 April), implying roughly a further 2.4% depreciation in the first four months of the year. The LKR also weakened 16.3% against the Euro and 12.0% against the GBP through 2025, which broadly improves Sri Lanka's price-competitiveness for European source markets.

Eleven months of deflation ended in August 2025. Below the 5% target but moving towards it. Stable, low-inflation environment supports tourism cost predictability.

Four of four reviews completed. The Extended Fund Facility programme runs to 2027. Anchors investor confidence and the country-risk perception that tourism implicitly relies on.

3.8 months of imports. Higher official reserves significantly reduce the risk of crisis-driven devaluations or capital controls, both of which would directly hit tourism.

Up from 1.2% in 2024. Third consecutive year of current account surplus. Indicates structural rebalancing, which supports rating upgrades and reduces sovereign-risk premium.

Fitch CCC+ (Dec 2024), Moody's Caa1 (Dec 2024), S&P CCC+ (Sept 2025), all from default ratings. The sovereign credit rating affects perceived destination risk, foreign cost of capital for hotel investors, and travel insurance pricing.

Outward Investment Account limits substantially relaxed. Higher caps on Business and Personal Foreign Currency Accounts. Easier for tourism operators to transact internationally and hold USD revenue. (See Capital Flow Management.)

CBSL credits "political stability" as a factor reinforcing recovery. Tourism is uniquely shock-sensitive: the report's own historical chart names "2019 Easter Sunday attack: Tourism sector heavily impacted" as a canonical disruptor.

Direct: airspace constraints disrupt the >30% of arrivals that transit through Middle East hubs. Indirect: Brent oil briefly above $100/barrel; investor and traveller sentiment hit. CBSL describes it as a "substantial external shock" requiring revised macro projections.

Damaged infrastructure including upcountry/northern rail lines (some still closed in early 2026). >1,300 schools affected. Exam disruption. Government allocated supplementary budget for reconstruction.

Listed by CBSL as one of 2025's external shocks. April 2025: 44% tariff announced. Renegotiated to 30%, then 20%. Feb 2026: US Supreme Court invalidated the regime; 10% imposed for 150 days. Affects discretionary US travel via consumer-confidence channel.