Sri Lanka’s alcohol tax increases in 2023 and 2024 were widely cited as a policy success – reducing sales and boosting government revenue. But new data from the Alcohol and Drug Information Centre (ADIC) shows that alcohol use is climbing again after more than a year without a price adjustment, eroding the gains.

“Alcohol Prices Remaining Stable Despite Inflation and Rising Personal Incomes Has Significantly Increased Purchasing Power”

Ada Derana reports: 

“Statistics indicate that alcohol consumption in Sri Lanka is on the rise, according to the Alcohol and Drug Information Centre. Based on 2025 data, local beer production has increased by 5% and liquor production by 17%, suggesting a corresponding rise in alcohol consumption, the Centre said.

“It further noted that the lack of a price revision in alcohol since the adjustment made at the beginning of 2024 has been a key contributing factor to this trend.”

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Assessment

Sri Lanka’s 2023–2024 alcohol tax reforms delivered clear results. A 20% excise increase in 2023 reduced sales by 8.3 million litres while raising government revenue by Rs. 11.6 billion. A further 20% increase in early 2024 produced an additional – though smaller – reduction of 430,000 litres, with revenue rising to Rs. 42.15 billion. Movendi International documented this as a double success for health and public finances.

The ADIC data now shows what happens when that progress is not sustained. No price adjustment has been made since early 2024. With inflation and rising incomes eroding the real cost of alcohol, purchasing power has increased and production figures for 2025 tell the story: beer up 5%, liquor up 17%. The government had signalled an intention to index alcohol taxes to inflation, which would have prevented precisely this kind of erosion – but that mechanism has not been implemented.

The Sri Lankan case is instructive beyond its own borders. One-off tax increases, however ambitious, lose their effect if not maintained through regular adjustments. The 2023–2024 reforms demonstrated that higher alcohol taxes can simultaneously reduce alcohol use and increase revenue. The 2025 production data demonstrates, just as clearly, that the benefits are reversible when governments fail to keep reducing the affordability of alcohol.