The Fiscal and Health System Burden of Population Ageing in Sri Lanka

This working paper is a direct sequel to Sri Lanka's double burden of disease, updating its fiscal and health-system analysis against the country's 2024 census, its ongoing IMF program, and the pension reform debate now underway in Colombo. It finds that Sri Lanka's demographic pressure has intensified since 2015 (the over-65 share of the population reached 12.6% at the 2024 census, with overall dependency climbing to 49.8%), while the fiscal capacity to absorb that cost has gone the opposite direction, shrinking after the 2022 sovereign default rather than growing. The paper traces three channels through which ageing presses on the budget: health expenditure, the public service pension system, and the shrinking base of working-age taxpayers funding both. Its central finding concerns the pension system specifically: it is not just expensive (Public Service Pension payments reached LKR 372.3 billion in 2023, 12% of total government revenue) but regressive, with nearly half of pension benefits going to the richest fifth of pensioners while two-thirds of the workforce has no pension coverage at all. The newly proposed National Contributory Pension Fund is examined as a necessary but politically difficult structural fix.