Sri Lanka has made encouraging progress in reducing poverty to below 7 percent of the population, but pockets of severe poverty remain and future prosperity will depend on addressing chronic revenue shortfalls and fostering a more competitive and inclusive economy, say new research findings announced by the World Bank Group. The Sri Lanka Poverty Assessment has found that the fall in poverty stems mostly from increasing labor incomes as the economy has shifted from less productive agriculture towards the industry and service sectors, more urbanization, and rising domestic demand. The World Bank Group carried out a Systematic Country Diagnostic (SCD) to identify the key constraints to sustaining progress in ending poverty and boosting shared prosperity. The SCD highlights that Sri Lanka has one of the lowest tax-to-GDP rates in the world, undercutting the government’s ability to invest in education, health, and other services. Meanwhile, generating growth and jobs are constrained by protectionist policies, low foreign direct investment, a deficit of skills needed for a middle income country, and an unduly large public sector. Addressing these issues will be critical for bringing all Sri Lankans out of poverty and ensuring a prosperous future shared by all.