This was bound to happen. First of all, Sri Lanka doesn't have a large population. Their population is much lower than that of other South Asian nations such as India, Pakistan and Bangladesh. And secondly, they don't have a proper first class system. The first class system in Sri Lanka is comprised of clubs in Colombo playing against each other. There is no such system in any of the other cities such as Jaffna and Galle. When entire domestic system is concentrated in just one city, it blunts the emergence of talent from other regions.
It's not just that though. Their entire economy went to shit recently right after COVID thanks to the previous corrupt administration leading to a crazy rebellion which the whole world witnessed live.
This obviously affected their cricket squads too in a negative manner leading to their performance decreasing drastically across all formats recently.