Economy of Sri Lanka

With an economy worth $80.591 billion (2015) ($233.637

billion PPP estimate),[1] and a per capita GDP of about $11,068.996
(PPP),Sri Lanka has mostly had strong growth rates in recent years until
the government toppled early in 2015 where most development projects
were stopped abruptly on corruption claims [citation needed]. In GDP per capita
terms, it is ahead of other countries in the South Asian region.
The main economic sectors of the country are tourism, tea export, apparel,
textile, rice production and other agricultural products. In addition to these
economic sectors, overseas employment contributes highly in foreign
exchange, 90% of expatriate Sri Lankans reside in the Middle East.
Since becoming independent from Britain in February 1948, the economy
of the country has been affected by natural disasters such as the 2004
Indian Ocean earthquake and a number of insurrections, such as the 1971,
the 1987-89 and the 1983-2009 civil war. The parties which ruled the
country after 1948 did not implement any national plan or policy on the
economy, veering between left and right wing economic practices. The
government during 1970-77 period applied pro-left economic policies and
practices. Between 1977 and 1994 the country came under UNP rule and
between 1994 and 2004 under SLFP rule. Both of these parties applied
pro-right policies. In 2001, Sri Lanka faced bankruptcy, with debt reaching
101% of GDP. The impending currency crisis was averted after the country
reached a hasty ceasefire agreement with the LTTE and brokered
substantial foreign loans. After 2004 the UPFAgovernment has
concentrated on mass production of goods for domestic consumption such
as rice, grain and other agricultural products. [10]
Almost five years after the end of the three-decade civil conflict, Sri Lanka
is now focusing on long-term strategic and structural development
challenges as it strives to transition to an upper middle income country. Key
challenges include ensuring that growth is inclusive, realigning public
spending and policy with the needs of a middle income country, ensuring
appropriate resource allocations for the various tiers of government, and

enhancing the role of the private sector, including provision of appropriate

incentives for increasing productivity and exports.
The Sri Lankan economy has seen robust annual growth at 6.4 percent
over the course of 2003 to 2012, well above its regional peers. Following
the end of the civil conflict in May 2009, growth rose initially to 8 percent,
largely reflecting a peace dividend, and underpinned by strong private
consumption and investment. While growth was mostly private sector
driven, public investment contributed through large infrastructure
investment, including post war reconstruction efforts in the North and
Eastern provinces. Growth was around 7 percent in 2013, driven by a
rebound in the service sector which accounts for approximately 60 percent
of GDP. With nearly 2 million Sri Lankans living abroad, overseas
employment has contributed with foreign exchange and remittances in the
order of 10 percent of GDP in 2013. Overall, unemployment at 4 percent is
low, although youth unemployment (ages 1524) at around 17.3 percent
and low female labor force participation at 30 percent do pose a challenge.
Sri Lanka has met the Millennium Development Goal (MDG) target of
halving extreme poverty and is on track to meet most of the other MDGs,
outperforming other South Asian countries. Whereas South Asia as a whole
is on track or an early achiever for nine of the 22 MDG indicators, Sri Lanka
manages this for 15 indicators. Among the targets achieved early are those
related to universal primary education and gender equality. Sri Lanka is
expected to meet the goals of maternal health and HIV/AIDs. Progress on
reaching the goals related to malnutrition and child mortality is, however,
slower. Indicators are mixed on the environment: while Sri Lanka is an early
achiever on indicators of protected area, ozone depleting substance
consumption, safe drinking water and basic sanitation, it has stagnated or
is slipping backwards on forest cover and CO2 emissions.
Sri Lanka experienced a big decline in poverty between 2002 and 2009
from 23 percent to 9 percent of the population. Despite the very positive
story of poverty reduction and shared prosperity, important development
challenges remain in Sri Lanka. Pockets of poverty continue to exist,
specifically in the districts of Batticaloa (in the Eastern Province), Jaffna (in
the Northern Province), Moneragala (in Uva Province) and in the estate
sector.

An estimated 9 percent of Sri Lankans who are no longer classified as poor

live within 20 percent of the poverty line and are, thus, vulnerable to shocks
which could cause them to fall back into poverty.
The Government strategic vision is laid out in the Mahinda Chintana
document of 2010. The strategy describes three clear goals: doubling per
capita income through sustained high investment; shifting the structure of
the economy; and ensuring inclusive growth, improvement in living
standards and social inclusion.
Sri Lanka is currently an IDA/IBRD blend country and the World Bank
Country Partnership Strategic objectives are aligned to support the country
achieve its development goals.
The country aspires to achieve the goal of doubling of per capita income to
$4,000 by 2016 from an estimated US$3,194 in 2013, but faces three
particular macroeconomic challenges. Sustaining an 8 percent-plus annual
growth to meet this goal will require:
(i) fostering private sector development and greater private investment;
(ii) increasing exports to generate jobs and managing the current account
deficit; and
(iii) further addressing fiscal imbalances and reversing the declining trend in
revenue collection.
Such growth would need to be driven by a high investment rate of above 40
percent of GDP, which seems ambitious given the countrys 31 percent
level in 2013.
The second goal is shifting the structure of the economy to be more
knowledge-based, globally integrated and competitive, environmentally
friendly, internally integrated and increasingly urban. Sri Lanka has a solid
base for achieving this goal, with a well educated population and a wealth
of environmental assets. Challenges going forward include providing
systems and incentives to give the labor force the types of skills needed for
a knowledge economy, establishment of economic policies that encourage
competitiveness, stronger efforts on environmental sustainability and

adaptation to climate change, and modernizing infrastructure systems to

integrate the disparate parts of the country and meet the needs of an
increasingly urban population.
Ensuring improvement in living standards and social inclusion:
Thanks to a long history of attention to access to basic services, Sri Lanka
excels for its income level on most social indicators. Malnutrition, however,
is an exception. As Sri Lanka becomes a middle income country, new
challenges are emerging (e.g. a rapidly aging population) and improving
the quality of services will be a major issue going forward. While increasing
the quality of services, the Mahinda Chintana aims to ensure that benefits
are equitably shared across all segments of the population and that social
inclusion is a priority.
In addition, the World Bank supports the countrys emerging challenges
and needs with a combination of technical support, knowledge products
relevant to lending and the use of IDA/IBRD lending.
Strengthening Sri Lankas resilience to natural disasters and climate
change has become a priority for the countrys development agenda.
Climate-related hazards pose a significant threat to economic and social
development in the country. The World Bank Group is well placed to assist
Sri Lanka in increasing both its physical and fiscal resilience to climate and
disaster risk, through adaptation enhancing investments and a Catastrophe
Deferred Draw-Down Option (CAT-DDO) which is a contingent credit line
that provides immediate liquidity to IBRD member countries in the
aftermath of a natural disaster. A comprehensive program of support in this
area is proposed in the upcoming progress report of the Country
Partnership Strategy.
Economy of Sri Lanka
Currency

Sri Lankan rupee (LKR)

Fiscal year

Calendar year

Trade organisations

SAFTA, WTO

Statistics
GDP

US$ 80.591 Billion (World bank.) / US$ 233.637 Billion PPP [1]

GDP growth

7.3% (2013)

GDP per capita

US$ 3,818.161 (2015) / US$ 11,068.996 USD PPP

GDP by sector

agriculture: 12.8%; industry: 29.2%; services: 58% (2009 est.)

Inflation (CPI)

6.9% (2012 est.)[2]

Population belowpoverty
line

4.3% (2011 est.)[2]

Gini coefficient

36.4 (2013)

Labour force

8,319,680([3]

[1]

Labour force by occupation agriculture: 32.7%; industry: 26.3%; services: 41% (December 2008 e
Unemployment

4.3% (2011)[2]

Main industries

processing of rubber, tea,coconuts, tobacco and otherAGRICULTUR

; telecommunications,insurance, banking; tourism,shipping; clothing,
refining,information technologyservices, construction

Ease-of-doing-business
rank

81st[4]
External

Exports

$10.89 billion (2011 est.)

Export goods

textiles and apparel, pharmaceuticals, tea, spices, diamonds, emeral

products, rubber manufactures, fish

Main export partners

United States 21.8%

United Kingdom 8.3%
India 4.5%
Germany 4.2% (2013 est.)[5]

Imports

$20.02 billion (2011 est.)

Import goods

textile fabrics, mineral products, petroleum, foodstuffs, machinery and

Main import partners

India 21.5%
China 17.6%
Singapore 10.1%
United Arab Emirates6.1%
Iran 4.9% (2013 est.)[6]

FDI stock

US$1 Billion (2011)

Gross external debt

$19.45 billion (31 December 2009 est.)

Public finances

Public debt

81% of GDP (2011 est.)

Revenues

$8.495 billion (2011 est.)

Expenses

$12.63 billion (2011 est.)

Economic aid

$808 million (2006)

Credit rating

Standard & Poor's:[7]

BB- (Domestic)
B+ (Foreign)
B+ (T&C Assessment)
Outlook: Stable[8]
Moody's:[8]
B1
Outlook: Stable
Fitch:[8]
B+
Outlook: Positive

Foreign reserves

$7.2 billion (17 April 2011 est.)

[9]

Sri Lanka Trade, Exports and Imports

Sri Lanka was a contracting party to the General Agreement on Tariffs and
Trade (GATT) and also became the founding member of the World Trade
Organization (WTO). For decades, the country assumed a proactive role as
a driving force to trigger trade liberalization in the region. Sri Lanka is also a
member of South Asian Free Trade Area (SAFTA). Sri Lanka
shares healthy trade relations with India after the two countries signed a
free trade agreement (FTA). By 2004, trade between the two nations rose
by 128% and reached USD 2.6 billion by 2006.Sri Lanka also leverages on
GSP+ trade preferences of the European Union. Australia has strong
trade ties with Sri Lanka. In the financial year 2008-09, the two-way trade
between these two countries amounted to $329 million. Sri Lanka trade
benefits a lot from its modern ports that were built by the British before
leaving they left the island. In 2009, the countrys exports stood at $7 billion
as compared to $8.137 billion in 2008. The imports also fell to $9.6 billion
2009 from $14.08 billion 2008.
Sri Lanka Exports Commodities
The major export commodities of Sri Lanka are:

Textiles and apparel

Tea and spices

Diamonds

Emeralds

Rubies

Coconut products

Rubber manufactures

Fish

Sri Lanka Exports Partners

The following graph depicts the share of various export partners of Sri
Lanka:

Sri Lanka Imports Commodities:

The major import commodities of Sri Lanka are as follows:

Textile fabrics

Mineral products

Petroleum

Foodstuffs

Machinery and transportation equipment

PakistanSri Lanka relations

PakistanSri Lanka relations refer to bilateral relations
between Pakistan and Sri Lanka. both countries are in the South
Asia region. In the past, Pakistan assisted the Government of Sri Lanka in
supplying High-Tech military equipment to the Sri Lankan army in the civil
war against the Liberation Tigers of Tamil Eelam.[1] The relationship also
fosters on strong mutual Sino-Pakistan and Sino-Sri Lankan relationship,
as China maintains strong mutual interest in the economic and military
development of Sri Lanka and Pakistan, Both Pakistan and Sri Lanka are
also members of SAARC.

There is a Pakistani embassy located in Colombo[2] and a Sri Lankan

embassy situated in Islamabad.[3]