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Sri Lanka’s World Bank upgradeA milestone but not the finish lineJuly 5, 2026 By Rathindra Kuruwita Sunday Observer LKSri Lanka has returned to the World Bank’s Upper-Middle-Income category, an international acknowledgement that the country has moved some distance away from the economic collapse of 2022.The World Bank described Sri Lanka’s case as a story of recovery, saying that the real Gross Domestic Product (GDP) grew by 5 percent in 2025, supported by a rebound across industries and growth in financial and tourism services.However, economists said that the economy is still fragile and that the National People’s Power (NPP) Government must continue its drive towards industrialisation and agricultural modernisation while enhancing State capacity.Ceaseless vigilance neededSri Lanka has been an upper-middle-income country before. It first reached Upper-Middle-Income status on the basis of 2018 data, with the World Bank publishing the classification in July 2019. But this came at a time when deeper weaknesses were already visible. A 2018 World Bank development update, titled More and Better Jobs for an Upper Middle-Income Country, stated that Sri Lanka needed stronger private investment, an export-led growth model, better jobs, higher productivity and deeper reforms to sustain progress. The country needed structural change to make the achievement durable.Instead of structural changes aimed at continued growth, the disastrous economic policies of the Gotabaya Rajapaksa Government contracted the economy sharply, drove inflation to 70 percent, collapsed the reserves and the State lost access to international capital markets.The latest upgrade signals that policies of the Government have produced results. Economics don and Director of the Postgraduate Institute of Humanities and Social Sciences (PGIHS) at the University of Peradeniya, Prof. Wasantha Athukorala said the improvement reflected the fiscal discipline of the Government. The stricter management of tax revenue, tighter control of Government spending and close supervision of the economy all contributed to the country’s return to Upper-Middle-Income status.The Central Bank too played a decisive role by maintaining strict oversight of monetary policy, he said. The combination of fiscal discipline and monetary restraint helped restore stability after a period when the State could neither finance itself easily nor maintain public confidence in the currency, Athukorala said.Sri Lanka could not have recovered without restoring basic macroeconomic order, i.e., improving revenue collection, bringing public spending under control, keeping inflation at desired levels and rebuilding the external buffers. Therefore, the upgrade is evidence that the economy has turned a corner, strengthens the case for investment, improves the country’s image among international partners and supports the argument that Sri Lanka is again a country where long-term decisions can be made with more predictability.Perception mattersPerception matters for a country that suffered a sovereign default only a few years ago. Internal and external stakeholders such as investors, lenders and development partners watch classifications, credit ratings, reserves, debt negotiations and policy consistency. The Upper-Middle-Income label alone will not bring investment, but it can help improve sentiment when combined with credible policy.Economist Umesh Moramudali said the classification sends a positive signal to investors. Given that the upgrade suggests that the economy is growing, it is useful if Sri Lanka decides to return to international bonds by reducing the risk premium demanded by investors.Sri Lanka is expected, under the broad assumptions of the IMF-supported program, to consider a return to International Sovereign Bond (ISB) markets in the coming years. Moramudali said while a positive international signal can help, the Government must have a clear borrowing strategy.Moving up the income classification can also mean gradually losing access to concessional financing. Sri Lanka has benefited from low-interest loans from institutions such as the International Development Association (IDA). As the country becomes a higher income country, such access can decline over time, pushing the country towards market borrowing.Concessional loans come with lower interest rates and longer repayment periods. International sovereign bonds are more expensive, short term and more sensitive to market confidence. An Upper Middle Income classification can help Sri Lanka borrow at a lower cost, but market borrowing remains costlier and riskier than concessional finance.A positive signThat does not make the upgrade meaningless. The Opposition is likely to argue that the people do not feel the Upper-Middle-Income in their daily lives. The Government itself agrees that the cost of food, transport, education, health care and debt repayments still weigh heavily on familiesThe Government’s task now is to convert stabilisation into better living conditions. The country has moved from collapse to recovery but it has not yet achieved shared prosperity.Sri Lanka’s structural weaknesses remain despite efforts of the Government. Exports are still too low as a share of GDP, Foreign Direct Investment (FDI) remains weak and the external situation remains volatile. The revenue gains have improved the fiscal position, and the Government must sustain it without overburdening the same taxpayers. The tax net must widen, administration must improve and growth must generate more revenue naturally.A boost in State capacity is needed to widen the tax net, improve the general administration of the State and to generate more organic growth. Governance may have taken the country to the upper-middle-income category again, but many public institutions are still abysmally weak, inefficient and corrupt. A more complex economy requires stronger institutions, better regulation, and officials capable of dealing with global investors, lenders and trade partners.The Government can use the moment to attract investment, promote exports, deepen tourism, expand the digital economy, and improve confidence. It can also use it to convince people why reforms must continue and as proof that discipline has worked. Taxes, subsidy reforms and reduced public spending has stabilised the economy, but they have also placed a heavy burden on households. The Government now has to protect the hardest hit by this burden through targeted relief, stronger social protection, continued investment in health and real attention to regional development. The recovery will be politically secure only when people begin to see it in their wages, jobs, public services and daily cost of living.Sri Lanka’s return to Upper-Middle-Income status is a recovery milestone but the lesson from 2019 shows us that staying there, and moving beyond it, requires the Government to manage the economy with ceaseless vigilance.
Crowds of mourners surround the convoy carrying the coffin of martyred Leader of the Islamic Revolution, Ayatollah Seyyed Ali Khamenei, during a funeral procession in Najaf, Iraq, on July 8, 2026.Millions attend funeral for Martyr Leader Ayatollah Khamenei in Iraq's Najaf and KarbalaWednesday, 08 July 2026 Press TVMillions of mourners have gathered in Iraq's holy cities of Najaf and Karbala for the funeral ceremonies of Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei, with Iraqi authorities reporting attendance in the millions.The official funeral procession began at 6 a.m. local time Wednesday in Najaf after funeral prayers were held over Ayatollah Khamenei's body at the shrine of Imam Ali (AS).The procession moved from the shrine through Kufa Bridge and the Thawrat al-Ashreen intersection toward al-Sadreen Square before the body continued to Karbala.Hashd al-Shaabi, Iraq's Popular Mobilization Forces, said more than 2.3 million people had taken part in the funeral procession in Najaf and that the number was continuing to increase as mourners arrived from across Iraq.Separately, Al Mayadeen television citing the Karbala governorate, reported that authorities had registered 7 million mourners in Karbala. From before dawn, mourners streamed into Najaf from across Iraq, which reports describing the gathering as "million-strong" and "unprecedented."Roads leading to the city were heavily congested as participants travelled from provinces including Basra, Muthanna and Maysan, while additional crowds entered Najaf from its eastern approaches.The six-kilometer funeral route was filled with mourners carrying portraits of Ayatollah Khamenei and waving Iraqi, Iranian and Hezbollah flags.The atmosphere in Najaf was marked by mourning as elegies and chants echoed across the city while a specially prepared vehicle carrying Ayatollah Khamenei's body slowly advanced through tightly packed crowds toward the main procession route.Security forces and organizing committees worked to manage the crowds and maintain order throughout the ceremony.Earlier on Wednesday, funeral prayers were held over Ayatollah Khamenei and members of his family at the shrine of Imam Ali (AS) in Najaf before the official procession began.The bodies were transported to Karbala following the Najaf ceremonies.In Karbala, the bodies were taken to the shrines of Imam Hussein (AS) and his martyred brother Abbas (AS) for farewell ceremonies.According to reports, mourning tents had been established throughout the funeral route and black banners had been raised across Najaf's streets and public squares.Although the funeral ceremonies in Najaf and Karbala were expected to last only several hours, reports said the scale of the event made it one of the largest in the modern history of the two cities, which routinely host millions of pilgrims during the Islamic months of Muharram, Safar, Shaaban and Ramadan.Correspondents said all roads leading into Najaf experienced exceptional traffic congestion as Iraqi citizens and foreign visitors continued arriving to attend the ceremonies.Among those attending was Ammar al-Hakim, leader of Iraq's National Wisdom Movement.Former Iraqi Prime Minister Nouri al-Maliki, who heads Iraq's State of Law coalition, said attending Ayatollah Khamenei's funeral and commemorating his legacy is "a duty.""Commemorating the legacy of the martyred Imam Sayyed Ali Khamenei, the great leader of the Islamic nation, and participating in his funeral is a duty because he was a great leader who remained steadfast, endured, stood against challenges and brought victory to the Iranian nation," Maliki said in remarks carried by the Iraqi News Agency."Everything the Iraqi people do today through their participation in the funeral of the martyred Imam Khamenei and through their other supportive positions, no matter how great or valuable, remains insufficient compared with the stature of this great figure, a figure who shaped a bright future not only for the Iranian nation but for many countries in the region," he said.Maliki said Ayatollah Khamenei "remained steadfast, resisted and stood against major powers known for their immense military strength until victory was achieved," adding that "the Iranian nation, through patience, perseverance and steadfastness despite all the challenges and losses it endured, emerged victorious.""We see the results of all this in the successes of the Islamic Republic of Iran, whether in political negotiations or on the battlefields," he said.Maliki added that Iraq's message is that "the Islamic Republic of Iran is not alone, but has friends who stand beside it and support it," and that Iran "stands on the side of truth" and has supporters around the world "even if some peoples, because of the political circumstances they experience, cannot openly express that support."Throughout the morning, crowds filled Najaf's streets in a historic farewell attended by unprecedented numbers of mourners.The official procession followed a reception ceremony at Najaf International Airport for Ayatollah Khamenei's body attended by senior Iraqi officials and prominent political and religious figures.Pezeshkian, Iraqi PM attend official reception for martyred Leader in NajafThe plane carrying the coffins of Ayatollah Khamenei and his martyred family members arrives in Iraq for a funeral procession.In recognition of the occasion, Iraqi Prime Minister Ali Faleh Al-Zaidi declared Wednesday an official public holiday across Iraq to coincide with the funeral ceremonies for the martyred Leader and his family.The multi-day funeral began on Friday with Ayatollah Khamenei’s body lying in state at Tehran’s Imam Khomeini Mosalla and foreign dignitaries and religious figures paying their respects. It continued on Saturday and Sunday with a public farewell and prayers, respectively.On Monday, millions packed the streets of Tehran as the funeral convoy made its way through the Iranian capital. Millions of mourners gathered at the Holy Jamkaran Mosque in Qom on Tuesday to offer funeral prayers for the martyred Leader.The final funeral rites are set to take place on Thursday in the northeastern Iranian city of Mashhad, where Ayatollah Khamenei will be buried at the shrine of Imam Reza (AS), the eighth Shia Imam, in accordance with the martyred Leader’s will.Ayatollah Khamenei was assassinated, alongside some of his family members, on February 28, the first day of the 40-day war of aggression waged by the United States and the Israeli regime against Iran.The Assembly of Experts subsequently appointed Ayatollah Seyyed Mojtaba Khamenei as the new Leader of the Islamic Revolution.
