Sri Lanka’s tourism sector is losing an estimated $ 1.13 billion every year through economic leakages, despite generating more than $ 3 billion in annual earnings, according to the country’s first Rapid Assessment of Economic Leakages released yesterday. The findings have raised concerns over the quality and sustainability of tourism growth, particularly as the sector struggles to attract higher-spending visitors.
The assessment, conducted by the Sri Lanka Tourism Development Authority (SLTDA) with technical assistance from UN Tourism, examined three key areas: accommodation providers, inbound tour operators, and the wellness and Ayurveda segment. The report estimates tourism earnings at $ 3.17 billion in 2024 and approximately $ 3.2 billion in 2025, yet nearly one-third of that income flows out of the domestic economy.
Speaking at a stakeholder workshop held to unveil the findings, SLTDA Chairman Buddhika Hewawasam described the scale of leakage as “alarming,” while stressing that much of it is preventable. He said at least $ 1.13 billion is lost annually through both internal and external leakages, noting that while some level of leakage is inherent in tourism, a significant portion could be reduced through targeted reforms.
A major contributor to the outflow is import-dependent procurement. Hewawasam said imports linked to tourism operations exceed $ 800 million annually, driven by heavy reliance on foreign food and beverages, furniture, equipment, and energy. In addition, widespread informality within the sector results in an estimated $ 84.8 million in lost government revenue each year due to tax non-compliance.
The report also highlighted particularly high leakage rates in the wellness and Ayurveda segment, exceeding 50%. Hewawasam said this raises serious questions about sourcing practices and local value retention in a segment that should, in principle, be rooted in domestic resources and expertise.
Tourism Deputy Minister Prof. Ruwan Ranasinghe said the findings underscore the limitations of focusing solely on arrival numbers and headline revenue figures. He noted that roughly one-third of every tourism dollar earned leaves the country, reducing the sector’s contribution to local income, employment and fiscal stability.
While acknowledging that certain imports are unavoidable, Prof. Ranasinghe said the study identifies clear opportunities to strengthen domestic supply chains and retain a greater share of tourism-generated income within Sri Lanka.
UN Tourism Development Economist Prof. Frederic Thomas said the assessment was intended to shift the conversation from diagnosis to practical solutions. He noted that while some leakages are structural, others are avoidable and can be addressed through policy measures. Imports of goods and services, he said, account for the largest share of losses.
Discussions at the workshop focused on formalisation, licensing, digital payments, stronger local value chains and sustainability standards. The outcomes are expected to shape a three-year implementation roadmap led by the SLTDA, with a strategic shift from maximising visitor numbers to increasing value retention.
Despite welcoming a record 2.36 million tourists in 2025, tourism income rose by only 1.6%, reflecting declining per-day spending. The SLTDA recently revised average daily tourist spending down to $ 148 from $ 171 estimated a decade ago, intensifying concerns over the sector’s long-term value creation.
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