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Macroeconomic Context
Following several years of relative uncertainty, the operating environment in 2024/25 was largely shaped by a steady, somewhat cautious improvement in global conditions and an encouragingly stabilising domestic economy. Internationally, as inflation moderated and consumer demand proved increasingly resilient, healthcare investment sustained its momentum, though geopolitical uncertainty and cost pressures persisted. At home, following the devastation of the 2022 financial crisis, Sri Lanka continued its forward momentum on its path of recovery, eyeing a more ambitious journey towards sustainable growth. With interest rates easing further and foreign reserves growing, early signs of renewed investor confidence proved a welcome relief. These shifts indicated a rise in patient affordability, healthcare demand patterns and capital planning across the private sector, which was especially of interest to us at Nawaloka as a major industry player.
Global Outlook
The global economy during the year under review was marked by modest but largely uneven growth, with the International Monetary Fund (IMF) projecting a global gross domestic product (GDP) expansion of 3.2% for both 2024 and 2025. Supported by ever tighter monetary policy, inflation pressures eased across advanced economies, even as energy and food prices stabilised from earlier highs. Among the world’s top two economies, the US maintained solid momentum with growth of 2.6% in 2024, while China’s economy slowed to around 4.6% amid some strain in the property sector and weakened external demand. In emerging markets, meanwhile, growth was more varied, with regional risks and capital outflows tempering momentum. Geopolitical instability, notably in the Middle East and Eastern Europe, also continued to pose risks to global supply chains, investor sentiment and of particular note, health sector procurement costs.
Domestic Picture
Back home, Sri Lanka’s domestic economy showed signs of gradual recovery in 2024/25, following the severe contraction of 2022, the worst in decades. The Central Bank of Sri Lanka (CBSL) estimated real GDP growth of 2.5-3.0% for 2024, supported by an impressive rebound in tourism, moderating inflation and increased remittances. Headline inflation, which had peaked at over 70% in mid-2022, fell sharply to low single digits by end-2024, with CCPI-based annual average inflation dropping to 1.2%. This helped restore purchasing power and ease pressure on household health spending, which had taken a hit following the crisis.
The rupee remained relatively stable throughout the reporting period, averaging Rs. 320 per USD. This was supported by improved reserves, tourism, and medical tourism services revenue and remittance inflows. It must be noted, however, that exchange rate volatility remains a material risk for sectors that rely on imported medical equipment and pharmaceuticals; the need for prudent capital planning is ever present. Meanwhile, interest rates trended downward, continuing on from the post-crisis recovery agenda, spurring credit demand across sectors. However, long overdue fiscal consolidation under the Extended Fund Facility (EFF) programme with the IMF continued to place some constraints on public health spending and household subsidies, inviting the private sector to step in and help meet national healthcare demand.
Sri Lanka elected a new government in the latter part of 2024 signalling a new policy direction; in a welcome development, the state continued its engagement with the IMF, and the programme remains critical to larger macro stabilisation. The international lender’s third programme review in March 2025 emphasised structural reforms, debt sustainability and governance. At the time of publishing this Report, market observers view this political transition as an inflection point, with implications for policy continuity, investor sentiment and the pace of healthcare sector liberalisation.
Sector Landscape
Regulatory Environment
The regulatory environment for private healthcare in Sri Lanka, a country that prioritises free healthcare, has historically been one that emphasised a patient-first approach to service delivery. During the year under review, this regulatory zeal continued to evolve, with a renewed and sharper focus on quality assurance, compliance and digital integration. Several developments in the regulatory landscape over the past several years remained institutionally relevant during the reporting period. Among these, the Private Health Services Regulatory Council (PHSRC), under the Ministry of Health, continued to advance its oversight through strengthened enforcement of standards for clinical governance, infection control and patient safety. Regulatory focus has now expanded to include periodic audits, transparent billing practices and adherence to updated guidelines on electronic prescriptions and data protection. In parallel to this, the National Medicines Regulatory Authority (NMRA) has intensified scrutiny of medical devices and pharmaceutical imports, in a bid to ensure supply chain integrity amid increasing reliance on foreign medical consumables. The Sri Lanka Medical Council (SLMC), meanwhile, further supported professional regulation by tightening continuing professional development (CPD) requirements for private sector practitioners. Collectively, these shifts reflect a broader policy push toward aligning with international accreditation frameworks, improving audit-readiness and ensuring that private hospitals contribute meaningfully to the national healthcare quality agenda.
Systemic Shifts
Sri Lanka’s private healthcare sector has undergone significant transformation over recent years, due to rising disposable incomes, a growing burden of non-communicable diseases (NCDs), expanding medical tourism and a marked shift towards customised, high-quality care. Nawaloka Hospitals has played a central role in shaping this evolution since its founding in 1985, offering innovations in cardiac care, organ transplantation, and minimally invasive surgery, and raising the bar of world-class care offered in the private healthcare sector. The Hospital’s consistent investment in advanced medical technology, infrastructure, and patient engagement platforms has positioned it as a leading provider for both domestic and international patients.
Nawaloka has kept up with rising demand for outpatient and day-care procedures, digitised billing and diagnostics, and expanded international operations. These systemic shifts have been reinforced by key trends such as:
- Rising demand for specialised care (such as fertility,
heart surgeries, elderly care) - Increased digitalisation, especially in diagnostics, billing and patient engagement
- Growing preference for outpatient and day-care procedures
- Emergence of health insurance as a mainstream payer model
- Medical tourism growth, especially from Maldives, Bangladesh, and parts of Africa
Medical innovation and digital health adoption accelerated during the year under review. This included AI-driven diagnostics, telehealth, remote patient monitoring (RPM), and data interoperability. These tools enhanced early detection, personalised treatment, operational efficiency and real-time care coordination.
New regulations introduced in 2024 included:
- Stricter infection control and hazardous waste guidelines
- Updated rules on e-prescriptions and data privacy
- Enhanced documentation standards for insurance claims
Nawaloka’s compliance teams proactively aligned with these updates to ensure full regulatory compliance throughout the reporting period. Meanwhile, policy-level reforms anticipated broader implementation of government-sponsored insurance, universal health coverage and mandatory private hospital accreditation, areas in which Nawaloka is already ahead of
the curve.
The external environment has also evolved in line with global quality benchmarks such as the World Health Organisation (WHO)’s National Quality Policy and Strategy (NQPS) and accreditation systems including ISO. Emphasis is placed on people-centred, safe, efficient care, bolstered by governance, patient engagement and measurable outcomes.
The Institute of Chartered Accountants of Sri Lanka has introduced SLFRS S1 and S2, based on IFRS S1 and S2, effective 01 January 2025. These require integrated disclosures on governance, strategy, risk management, and metrics related to sustainability and climate resilience. Nawaloka is well-positioned to lead this transition in the private healthcare sector.
Changing Patient Demographics
It has long been observed that Sri Lanka has an aging population. In 2023, total population stood at 22.97 million, with projections reaching 24.81 million by 2050. Aging demographics and NCD prevalence remain a sociocultural challenge and are shaping service demand across private and state health sectors. According to WHO data, the top cause of death in women in Sri Lanka is stroke (113.3), whereas the top cause of death in men is ischaemic heart disease (108.3). The data indicate the prevalence of NCDs such as cardiovascular diseases, hypertension and diabetes mellitus in both men and women.
Top Causes of Death – Female Deaths per 100,000 population, Sri Lanka, 2021 |
|
Stroke | 113.3 |
Ischaemic heart disease | 82.9 |
Diabetes mellitus | 56.1 |
COVID-19 | 50.0 |
Chronic obstructive pulmonary disease | 39.7 |
Alzheimer disease and other dementias | 22.5 |
Top Causes of Death – Male Deaths per 100,000 population, Sri Lanka, 2021 |
|
Ischaemic heart disease | 108.3 |
Stroke | 96.3 |
COVID-19 | 87.8 |
Chronic obstructive pulmonary disease | 48.7 |
Diabetes mellitus | 43.0 |
Self-harm | 24.2 |
Kidney diseases | 23.6 |
Patients increasingly favour shorter hospital stays, minimally invasive procedures, wellness-oriented services and real-time engagement via digital tools. There is also growing demand for elderly care and home-based care, decentralised diagnostics and chronic disease management. Nawaloka has responded with tech-enabled services and wellness platforms.
Competitive Landscape
In the wake of the 2022 currency crisis, labour migration has been debilitating issue for a majority of industries and healthcare has been particularly vulnerable to the outflow of skilled healthcare professionals. In 2024, 314,828 Sri Lankans departed for foreign employment, up 5.8% from 2023. The Government Medical Officers’ Association (GMOA) reported 526 medical officers on extended foreign leave, 200 departures without formal notification, and 197 resignations between August 2022 and August 2023: trends that pose a worrying challenge to workforce continuity in private healthcare.
Despite this, Nawaloka has preserved its competitive edge through international expansion and brand positioning. As mentioned previously in this chapter, markets such as the Maldives, Seychelles, the Middle East, Europe, and Australia were targeted through strategic alliances and tailored healthcare packages.
The Hospital has also anticipated rising global competition from regional peers like India and Thailand, focusing on specialisations such as oncology, fertility, cardiac surgery, orthopaedics, and cosmetic medicine. Our emphasis on advanced infrastructure, experienced consultants,and patient-centric care has sustained
its appeal among international clients.
Service Range and Infrastructure
There are several areas of specialisation in which growing demand has been observed. These include:
- Fertility and women’s health
- Dialysis and nephrology
- Cardiology and cath lab procedures
- Cosmetic and aesthetic medicine
- Preventive diagnostics and executive health checks
Nawaloka has continued to upgrade its service portfolio through investments in modern infrastructure and expert consultants. Services are complemented by digital platforms that offer appointment scheduling, real-time results and concierge-style patient support.
The Hospital has expanded its portfolio of services to better serve global patients, incorporating AI-assisted planning, RPM tools and integrated care systems. International engagement has been bolstered through market research and partnerships with medical facilitators.
Outlook and Strategic Implications
Nawaloka Hospitals PLC is well-positioned to navigate the evolving healthcare landscape amid macroeconomic recovery and sectoral transformation. Continued digitalisation, infrastructure modernisation and regulatory compliance enhance its strategic posture. The anticipated acceleration of ESG standards, combined with demographic pressures and policy liberalisation, offers both challenges and opportunities.
The Hospital’s early alignment with emerging standards such as SLFRS S1/S2, and NQPS and our proactive international expansion strategy serve to boost our reputation as a leader in Sri Lanka’s private healthcare sector and a regional medical tourism services provider. These developments are expected to drive sustainable growth, enhance patient outcomes and solidify Nawaloka’s role in supporting national healthcare priorities.