Sri Lanka’s defence spending is anticipated to reach $2bn by 2023, witnessing a compound annual growth rate (CAGR) of 1.71% over the next five years, according to a report by Strategic Defence Intelligence (SDI).
Titled ‘Future of the Sri Lankan Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2023’, the report provides insights of the Sri Lankan defence industry.
The defence budget reached $1.9bn in 2018, recording a CAGR of -1.35% during the historic period.
Post-war rehabilitation, the threat of the re-emergence of Liberation Tigers of Tamil Eelam (LTTE) affiliates, and disturbed relationship with India have driven the military expenditure during the period.
As a percentage of gross domestic product (GDP), Sri Lanka’s missile spending is expected to average 1.8% during the five years, compared to an average of 2.4% registered during the historic period.
The allocation of capital spending is expected to fall to an average of 8.4% during the forecast period, compared to the average of 12.1% during the historic period.
Acquisition of advanced defence equipment and rising focus on locally built defence capabilities are the primary reasons for the decline.
Over the forecast period, revenue expenditure is expected to rise to an average of 91.6%, the report added.
Sri Lanka’s homeland security spending is expected to reach $790m in 2023, representing a CAGR of 3.72% during the forecast period.
Military imports are also anticipated to rise between 2019 and 2023.
The country is encouraging collaborations and joint training programmes to support native manufacturing companies in addition to enhancing technological know-how.