THE COVID-19 IMPACT ON LIVELIHOODS AND POVERTY IN SRI LANKA - Background note to Sri Lanka Poverty Assessment

Jul 19, 2026

The COVID-19 crisis delivered a significant shock to Sri Lanka’s economy and people, examined here through expected impacts on poverty and inequality amid widespread job and earnings losses. Despite relatively low poverty before the pandemic, pre-existing vulnerabilities remained high due to informality and limited access to employment protection and related social protection benefits. Simulation-based results indicate an increase in the international $3.20 poverty rate from 9.2% in 2019 to 11.7% in 2020. Livelihood support programs absorbed part of the shock, though targeting could be improved for stronger poverty reduction.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages32

Reading Time1 h 21 min

AccessFree to download

Contents

Executive summary

Context

The Sri Lanka Labor Market and the COVID-19 Shock

The Distributional Impact ofCOVID-19

Conclusion

Annex 1 - Summary of Relief Measures Used in Simulation

Bibliography

Figures

Tables

Pub lic Disclosure Authorized Pub lic Disclosure Authorized Pub lic Disclosure Authorized Pub lic Disclosure Authorized THE COVID-19 IMPACT ON LIVELIHOODSAND POVERTY IN SRI LANKA Background note to Sri Lanka Poverty Assessment THE COVID-19 IMPACT ON LIVELIHOODSAND POVERTY IN SRI LANKA Background note to Sri Lanka Poverty Assessment © 2021 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 [Internet: www.worldbank.org](Internet: www.worldbank.org) This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: [pubrights@worldbank.org](pubrights@worldbank.org). Cover design: Wojciech Wolocznik, Cambridge, United Kingdom Interior design and typesetting: Piotr Ruczyński, London, United Kingdom Contents Acknowledgements 6 Abbreviations 6 Executive summary 7 1. Context 8 2. The Sri Lanka Labor Market and the COVID-19 Shock 12 Low earnings and lack of safety net, partly due to high informality, lead to high levels of vulnerability 13 The COVID-19 crisis led to widespread job losses 14 3. The Distributional Impact ofCOVID-19 18 Earnings losses led to a significant increase in poverty 19 Livelihood support programs helped absorb the shock, but better targeting could have enhanced their effectiveness to reduce poverty 20 The new poor are more urban, but the crisis did not fundamentally change the nature of poverty 22 Inequalities will likely widen, with potential consequences for the long term 25 4. Conclusion 27 Annex 1 Summary of Relief Measures Used in Simulation 30 Bibliography 31 Figures Figure 1 Daily total (left) and newly confirmed (right) COVID-19 cases in Sri Lanka 9 Figure 2 Real GDP growth in Sri Lanka (%) 10 Figure 3 Increase in poverty from hypothetical consumption shocks 14 Figure 4 Share of jobs lost by sector 16 Figure 5 Share of displaced workers by employment status 16 Figure 6 Share of jobs lost by province 17 Figure 7 Share of displaced workers by education 17 Figure 8 Average income loss across the income distribution 19 Figure 9 Poverty impact of COVID-19 crisis 20 Figure 10 Distribution of poor and nonpoor people by province 22 Figure 11 Number of poor by province, pre-and post-COVID-19 23 Figure 12 $3.20 poverty rate by province 23 Figure 13 Map of the distribution of new poor 23 Figure 14 Distribution of working-age population (age 15+) by sector of employme

FAQs

Why were Sri Lanka workers especially vulnerable before and during COVID-19?

High informality and limited access to employment protection or job-related social protection benefits left many workers exposed during economic downturns.

What does the background note estimate about COVID-19’s effect on poverty?

Simulation results suggest the international $3.20 poverty rate rose from 9.2% in 2019 to 11.7% in 2020, driven by earnings losses.

How effective were livelihood support programs in reducing the shock’s poverty impact?

Livelihood support helped absorb part of the shock, but the note indicates that better targeting could have improved their effectiveness in reducing poverty.

Jul 19, 2026

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