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Opportunities and challenges of the Sri Lankan health sector

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Market overview: Compared to other South Asian countries, health care spending in Sri Lanka is high. In 2022, it amounted to $146 per capita, while in India, spending was only $79 per capita during the same period. In 2021, health care spending accounted for 4.07% of Sri Lanka’s gross domestic product (GDP).

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Primary care in Sri Lanka’s healthcare system is provided by a network of public hospitals and other healthcare institutions administered by the Ministry of Health. Care at these facilities is largely free of charge for patients. In addition, there is a system of private facilities where patients must cover the treatment costs themselves. Only a small portion of the costs are covered by private health insurance. Public health insurance is provided only for approximately 3–4 million government employees (Agrahara Insurance Scheme). 

 

According to the Ministry of Health, public institutions cover 95% of inpatient care and 50% of outpatient care. The dual system thus enables virtually the entire population to access basic health services. However, relying solely on public funding carries the risk of underfunding public health institutions.   

 

As of 2024, the Ministry of Health lists approximately 630 public hospitals and about 580 public primary and basic healthcare facilities. In contrast, there are approximately 220 private hospitals. Many of these healthcare facilities are located in the vicinity of the major cities of Colombo, Kandy, and Jaffna. In recent years, significant investments have been made in the creation of new facilities. For example, in 2025, a state-of-the-art hospital with a capacity of 150 beds was opened in Colombo, and in Karapitiya Galle—with German support—the largest maternity hospital in South Asia, with 640 beds, was opened. 

 

To improve healthcare services, the Ministry of Health is increasingly promoting partnerships between public and private entities (public-private partnerships—PPPs). The aim is to encourage private entities to expand capacity in the healthcare sector in order to ensure comprehensive medical care for the population. 

Developments in the Sri Lankan health sector 

  • Demographic change 

The health of the Sri Lankan population has improved significantly in recent years. While life expectancy was 73 years in 2003, that figure rose to 77 years in 2023. In addition, experts anticipate a significant aging of Sri Lankan society. While in 2017 only about 14% of the population was 60 years of age or older, it is expected that by 2037 nearly 22% of the population will belong to this age group. This trend is expected to continue in the years to come.

 

This aging of society led to the adoption of a national strategy for older adults by Sri Lanka’s Ministry of Social and Rural Development in 2025. Among other things, this strategy includes the expansion of affordable, high-quality health services for older adults, such as preventive care, rehabilitation, nursing care, and palliative care. To this end, care for older adults is to be improved at all levels of the healthcare system, using, for example, telemedicine, artificial intelligence, and staff training. 

 

As part of efforts to care for the aging population, uniform certification regulations and service standards are to be established. In addition, the government intends to address the shortage of nursing staff by creating short- and medium-term continuing education programs. These professionals will also be supported financially and through special leave arrangements to boost motivation and prevent burnout. 

 

Nevertheless, the current state of elderly care still leaves room for improvement. As of 2023, there were only two geriatric facilities in the country, one in Colombo and one in Kandy. At the same time, working conditions in the care sector are often characterized by a lack of transparency and uncertainty, and there are still few institutions offering training and continuing education for nursing professionals. 

 

  • Shift in health risks 

Improvements in public health have been accompanied by a shift in health risks. According to the Ministry of Health, 70% of all deaths are now attributable to noncommunicable diseases such as cardiovascular disease, cancer, or other chronic conditions. 

 

Germany Trade & Invest (GTAI) therefore expects demand for medical devices in Sri Lanka to rise across all sectors in the coming years. While sales of $230.9 million were recorded in 2022, sales of nearly $370 million are expected for 2028 and as much as $450 million for 2030. The focus here is particularly on the field of early detection. According to experts, there is a particular demand for imaging devices, such as computed tomography (CT) scanners and magnetic resonance imaging (MRI) scanners.  

 

In addition, the rising incidence of chronic diseases such as cancer, diabetes, and cardiovascular diseases is driving increased demand for therapeutic medical devices. Analysts also predict that demand for devices used in patient rehabilitation will grow in the coming years. 

 

  • Digitization 

In 2023, the Sri Lankan Ministry of Health published a Digital Health Blueprint outlining the path toward greater digitization of the healthcare system. A central component of this strategy is the introduction of a National Electronic Health Record, which is intended to document patients’ health status from birth until the end of life. This is intended to create a unified information system that allows patients to switch between different hospitals and healthcare institutions without losing their health information. The interoperability of the various information systems in the healthcare sector is to be facilitated to improve patient care. 

 

All future investments in the healthcare sector should be consistent with the Digital Health Footprint. This includes not only the implementation of the software necessary for seamless communication but also the procurement of appropriate hardware for hospitals and other institutions. While the primary goal on the software side is to standardize the three previously independent hospital systems, the Ministry of Health also recognizes the need to invest in state-of-the-art technology that enables reliable and rapid information exchange. 

 

Meanwhile, there are already several digital applications available in the Sri Lankan healthcare market. During the COVID-19 pandemic, the number of telemedicine providers grew significantly. To regulate this sector, the Ministry of Health issued its first guidelines in 2024 to ensure uniform standards. Major hospitals also offer telemedicine consultations. Furthermore, it is now easy to schedule doctor’s appointments online. There are a variety of providers that facilitate this process via the internet.  

 

  • Tourism 

Global revenue from health and wellness tourism totaled $850 billion in 2021. Global revenue is expected to rise to approximately $1.672 trillion by 2030. This therefore presents significant opportunities for German health companies. 

 

In Sri Lanka, however, this market remains largely untapped. In 2024, only about 3.5% of tourists visited Sri Lanka for medical treatments. Nevertheless, there are good opportunities for market growth, particularly given Sri Lanka’s international reputation for Ayurvedic treatments and the comparatively well-developed healthcare system, especially in private clinics. The primary target group here is already predominantly German. Of the 5,451 tourists who traveled to Sri Lanka for medical treatment in 2024, 4,702 were from Germany. 

 

In addition, Sri Lanka offers visas through the Dream Home Program for older adults who wish to retire in the country. However, there is no data available on how well this program has been received. 

Challenges in the Sri Lankan health sector 

  • Regulatory hurdles 

While private hospitals organize and manage the procurement of medical devices on their own, various government agencies are involved in the procurement of medical devices by public institutions. Importation first requires registration with the National Medicines Regulatory Authority (NMRA), which is the primary regulatory body overseeing the importation of medical devices. A particular problem here is that the authorities do not operate according to international standards but instead apply their own national criteria to imported goods. This makes it considerably more difficult to plan the registration process.   

 

Furthermore, other institutions are involved. Specifically important here is the Medical Supplies Division, which is primarily responsible for the storage and distribution of medical supplies. In this role, it also influences the tender criteria. To address these problems, the government has announced its intention to make the tendering process more transparent. However, due to personnel changes, delays have occurred so far. Thus, whether a simplification of procurement processes can be achieved remains uncertain. 

 

In addition to these regulatory issues, import duties must also be taken into account. For example, in addition to the 18% value-added tax (VAT) levied on medical devices, a 10% import duty is generally imposed when goods are imported by ship or air. On top of this, a 2.5% social security contribution levy is also levied on medical imports. 

 

  • Financial situation 

Demand for medical technology continues to depend heavily on how the Sri Lankan government’s financial situation develops. Since the healthcare system is largely funded by the state, there is a risk that necessary investments will not be made if the economic situation deteriorates. For this reason, the effects of the global economic situation are likely to be felt in the healthcare sector as well. Should the tense situation in the Middle East lead to a sustained increase in energy costs, additional government spending on oil and gas would also impact the financial viability of healthcare acquisitions. 

 

  • Differences in healthcare provision between urban and rural areas 

According to the World Bank, despite increasing urbanization, approximately 80% of Sri Lanka’s population still lives in rural areas. In contrast, most healthcare facilities are located in cities. Consequently, there is a shortage of public primary healthcare facilities, particularly in rural areas. This shortage is, however, often offset by a sufficient number of private institutions. Therefore, there is no overall shortage of healthcare services in rural areas. 

 

  • Skills shortage 

The training of doctors and other healthcare professionals in Sri Lanka is very good by regional standards. Medical training generally lasts five to six years and consists of preclinical and clinical components, as well as practical training. Nursing education is also organized by the government. Here, one can complete an approximately one-year training program to become a nursing assistant. In addition, there is a bachelor’s and master’s degree program for nursing. 

 

However, the shortage of well-trained personnel remains a problem in the healthcare sector. During the economic crisis, there was a significant exodus of skilled workers to other countries. Due to a lower standard of living compared to Western countries, this phenomenon has not disappeared even after the economic crisis has been overcome. Countering this brain drain therefore remains a critical challenge in the Sri Lankan healthcare sector. 

Opportunities for German enterprises 

These developments present market opportunities for German companies in various areas of the healthcare sector. 

 

In the field of medical technology, German companies can capitalize on the anticipated high demand to establish themselves in the Sri Lankan market. Given the rising demand across all sectors of medical technology, this presents development opportunities for many companies. Attention should be paid to manufacturers of medical imaging devices, which are primarily used for diagnosis. However, manufacturers of therapeutic devices can also take advantage of the reduction in the investment backlog caused by the economic crisis of the early 2020s. The ongoing Westernization of the Sri Lankan population’s healthcare landscape will, in the long term, lead to demand for medical products converging with that of Western societies.

 

There is also growth potential in the integration of tourism and health-related treatments, depending on the global security situation. Sri Lanka is well-known in Germany for its Ayurvedic treatments. This is evidenced by the relatively high number of German health tourists visiting the country. There is an opportunity here to attract more German tourists to Sri Lanka for medical treatments through targeted marketing. Given that the market is still small, this presents significant growth potential. 

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