COLOMBO (News 1st); Sri Lanka must accelerate digital transformation, boost productivity and expand workforce participation if it is to sustain long-term economic growth amid a rapidly aging population, according to the Shaping the Future of Asia: Opportunities and Challenges report published by the International Monetary Fund.
The IMF identifies Sri Lanka as one of Asia's economies that has moved beyond its demographic dividend phase and is now confronting a shrinking working-age population and increasing pressures associated with population aging. The report notes that demographic change is emerging as one of the most important long-term challenges facing the country, with implications for labor supply, productivity, pensions, healthcare expenditure and economic growth.
According to the study, Sri Lanka belongs to a group of economies where the share of working-age people is declining relative to the overall population, joining countries such as China, Japan and South Korea in confronting post-dividend demographic realities.
The report emphasizes that future growth can no longer depend primarily on workforce expansion and instead must come from higher productivity, technological adoption and better utilization of human capital. Increasing female labor force participation and encouraging greater participation among older workers are identified as critical policy responses to offset demographic pressures. The IMF estimates that matching women's employment rates with those of men across Asia could add more than 112 million workers to the regional labor force.
On the digital front, Sri Lanka is highlighted as an example of successful public-sector digital innovation. The report points to the country's GovPay platform as a model for improving public service delivery, increasing transparency, reducing leakages and strengthening fiscal governance through digital payments. The IMF notes that digital payment systems can also improve financial inclusion and reduce transaction costs across the economy.
Artificial intelligence and digitalization are identified as major opportunities for Sri Lanka. The IMF argues that new technologies could help economies counter the effects of aging populations by improving productivity, enhancing service delivery and creating new economic opportunities. However, realizing these benefits will require investments in digital infrastructure, education, workforce skills and innovation.
The report further notes that Sri Lanka continues to face challenges related to youth unemployment and skills development, underscoring the need to better align education outcomes with labor market demands. Developing a workforce capable of adapting to technological change will be critical as economies across Asia increasingly adopt artificial intelligence and digital technologies.
The IMF concludes that Sri Lanka's long-term prosperity will depend on its ability to increase productivity, deepen digital transformation, strengthen financial development, encourage innovation and improve labor force participation. While the challenges posed by demographic change are significant, the report says early reforms and technology adoption can help safeguard growth and maintain living standards in the decades ahead.
