Sri Lanka is a developing economy based largely on agriculture, services, and light industry. Agriculture accounts for approximately 21 percent of the gross domestic product (GDP) and employs 38 percent of the workforce. Agricultural output is divided between cash crops from plantation agriculture and food crops from subsistence agriculture. Cash crops—namely tea, rubber, and coconuts—are largely grown on plantations. Rice is the principal food crop and the main livelihood for over 70 percent of Sri Lanka's rural population. Manufacturing industries account for approximately 19 percent of the gross domestic product and employ about 17 percent of the workforce. Chief manufactures include textiles, ceramics, petroleum products, vegetable oils, fertilizers, and cement. The service sector is the largest of the Sri Lanka economy, employing 45 percent of the workforce and contributing roughly 60 percent of GDP. Tourism, banking, finance, and retail trade are the major components of the service sector.
The country is endowed with many natural resources. It has an equatorial climate with a high average rainfall. The land is fertile and suitable for growing a variety of crops, and one-third of the land is arable. Rivers cascading from the central hill country provide energy to generate hydropower, the major source of electricity in Sri Lanka. The country also has rich fishing resources. Sri Lanka's mineral resources include titanium ore, graphite, kaolin, and gemstones. It also has large deposits of unexploited iron ore.
Foreign trade is an important segment of the Sri Lankan economy. Major imports include petroleum, consumables, machinery and capital equipment, motor vehicles, and various manufactured goods. Major exports include garments, tea, rubber, coconut products, foodstuffs, gems, and jewelry. Sri Lanka is the largest exporter of black tea in the world and the third largest producer of natural rubber. A variety of gemstones, for which Sri Lanka is world famous, are also exported. Significant quantities of high-grade graphite, for which Sri Lanka is a world leader, are also exported. The industrialized countries taken together as a group accounted for 75 percent of Sri Lanka's total exports in 1999 and the United States is the largest single buyer of Sri Lanka's exports, with 39 percent in 1999. Other major export markets are the United Kingdom, Germany, Japan, Russia (tea), China (rubber), India, and the Middle East. In terms of imports, Japan is the single largest exporter to Sri Lanka. Motor vehicles, spare parts, and woven fabrics are the major items imported from Japan. India is the second largest exporter, followed by Singapore, South Korea, Taiwan, the United Kingdom, and the United States.
Sri Lanka is a mixed economy, in which both the private sector and the state sector engage in the production process. Foreign investments are encouraged and several free zones have been established. The country's banking system is well developed, so that both foreign and local banks function in the economy. Sri Lanka is committed to a free market ideology and has one of the most liberal foreign trade regimes in the world. This contrasts greatly to what the Sri Lankan economy looked like during the first 3 decades after the country gained independence from Great Britain in 1948. The economy that evolved in Sri Lanka under British rule was predominantly oriented towards agriculture, with plantation agriculture being the major contributor to the nation's growth. The 3 plantation crops—tea, rubber, and coconuts—accounted for 30 percent of the gross domestic product in 1948 and the bulk of the output was exported. Manufacturing was an insignificant activity in the economy. Banking and commerce were, for the most part, only used to support plantation agriculture. Nearly all foreign exchange earnings were derived from the plantations. The country depended on imports for nearly three-fourths of its food requirements and almost all of its manufactured goods.
The Sri Lankan economy has since become highly diversified; it has rapidly growing manufacturing and service sectors, agricultural activities have been modernized, and the country is nearly self-sufficient in rice production. The significance of the 3 major export crops (tea, rubber, and coconuts) as the main source of export earnings has fallen (from 90 percent in the 1950s to 16 percent in 1999) and the significance of manufacturing has risen (from 1 percent of exports in 1950 to 60 percent in 1999). These changes in the structure of the Sri Lankan economy are a result of varying economic policy measures adopted by the government since independence. Development strategies that shaped the Sri Lankan economy over the last 5 decades may be distinguished under 2 eras: the first era covering the period between 1948-76, and the second era during the post-1977 period.
During the first era, development policy focused on achieving the objectives of equity and economic growth. The instruments adopted to achieve economic growth were aimed at import substitution industrialization, both in manufacturing and foodstuffs. The key measures used to achieve this growth strategy were the imposition of various restrictions on imports, and the encouragement of domestic production. Extensive social welfare programs such as price subsidies on food, statutory price controls on consumer goods , and the provision of free education and health services were the instruments used to achieve greater equity. The welfare programs achieved significant improvements in the area of human development, including lower mortality rates, increased life expectancy, and high literacy rates. However, high welfare expenditures restrained the nation's capital growth and ability to invest, slowing economic growth and causing high unemployment and low wages. During the 1951-1976 period, per capita gross domestic product grew only at an average of 0.2 percent per year. The achievements of the import substitution policies were even less noticeable, except in the production of rice and subsidiary food crops. With a worsening trade balance crisis, most newly established industries operated well below capacity due to a shortage of imported goods. This, coupled with increased government participation in industrial development, hindered industrial growth and the ability to remain commercially viable. The continued government intervention in all spheres of economic life reached its climax at the end of the first policy era.
The second era of Sri Lankan economic development (post-1977) marked a shift towards a free market economy. The strategy aimed at liberalizing the economy from excessive government controls and it chose the private sector as the engine of growth. Policies were designed to accelerate economic growth by stimulating private investment through various incentives and also to increase the country's foreign earnings by promoting export-oriented economic activities. The liberalization policies, pursued under the watchful eye and participation of the International Monetary Fund and the World Bank, met with success at the beginning. Stimulated by enhanced levels of foreign aid and investment, the economy was successful, recording real growth rates of about 6 percent per year until 1986. During the following 5 years, however, there was a marked deceleration of growth caused mainly by the disruptive effects of the ethnic conflict on economic activities. Gross domestic product grew at an annual average of 2.7 percent between 1986-1989, and at an annual average of 5 percent between 1990-2000. During the second era, the level of income in the economy grew significantly with per capita gross domestic product more than doubling (from US$382 in 1975 to US$802 by 2000).
The transition to a free market economy based on a liberalized trade and exchange rate regime has brought benefits to the Sri Lankan economy. Unemployment, a problem for decades, has reduced significantly, and remains at historically low levels (8 percent in 2000). Nonetheless, the high levels of inflation , fueled by the sharp deterioration of the Sri Lankan currency, combined with the mounting cost of civil war has raised the cost of living to very high levels. The soaring cost of living has made many Sri Lankans struggle to satisfy their basic needs. Over 45 percent of the population depends on benefits under the income supplement programs initiated by the government. The balance of payments problem remains unresolved. The persistent trade deficit has led to increased reliance on foreign aid to meet the country's import requirements, leading to an inevitably mounting foreign debt . Foreign debt as a percentage of the gross domestic product, which accounted for 21 percent in 1975, grew to 75 percent in 1994, and amounted to 59 percent in 1999.
FAQs
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.
What is the general overview of Sri Lanka? ›
Sri Lanka is a small island in the Indian Ocean with a land area of 25,000 square miles and a population of 18.3 million. Topographically the island consists of a south central mountainous region which rises to an elevation of 2,502m and is surrounded by broad lowland plains at an elevation of 0-75 m above sea level.
What are the major economic problems in Sri Lanka? ›
External debt
Sri Lanka's foreign debt increased substantially, going from US$11.3 billion in 2005 to $56.3 billion in 2020. While foreign debt was about 42% of the GDP in 2019, it rose to 119% of its GDP in 2021.
How is the economic growth in Sri Lanka? ›
GDP Annual Growth Rate in Sri Lanka averaged 4.27 percent from 2003 until 2022, reaching an all time high of 16.30 percent in the second quarter of 2021 and a record low of -14.80 percent in the second quarter of 2020.
Is Sri Lanka economy good? ›
The contraction is the biggest in the crisis-hit island nation's 75 years of independence. Sri Lanka's crisis-hit economy shrank by a record 7.8 percent last year, official data shows, as the country struggles with its worst financial crisis in seven decades.
What is the economic efficiency of Sri Lanka? ›
Sri Lanka's economic freedom score is 52.2, making its economy the 136th freest in the 2023 Index. Its score is 1.1 points lower than last year. Sri Lanka is ranked 28th out of 39 countries in the Asia–Pacific region, and its score remains below the world and regional averages.
What are 5 facts about Sri Lanka? ›
15 Interesting Facts About Sri Lanka, the Land of Serendipity
- It is nicknamed Pearl of the Indian Ocean and teardrop of India. ...
- It's packed with a large variety of animals. ...
- Tea is a big business in Sri Lanka. ...
- It is home of cinnamon. ...
- You'll think of England in the town of Nuwara Eliya.
Sri Lanka controls the three continents of the Indian Ocean, Asia, Africa, and Australia. Sri Lanka is a major waterway hub with important ports such as Colombo, Galle, Trincomalee, and Hambantota.
Why is Sri Lanka having economic problems? ›
However, many experts blame Mr Rajapaksa's economic policies. At the end of its civil war in 2009, Sri Lanka chose to focus on providing goods to its domestic market, instead of trying to boost foreign trade. This meant its income from exports to other countries remained low, while the bill for imports kept growing.
What are the three major economic problems? ›
The three basic problem of economics are:
- What to produce.
- How to produce.
- For whom to produce.
Sri Lanka: Economic crisis has had 'devastating consequences' on healthcare and food supplies - new report. People in Sri Lanka face little to no access to healthcare while being driven to the brink of starvation, malnutrition and deep poverty, Amnesty International said in a new report today.
What are the social issues in Sri Lanka? ›
Crimes, alcohol and drug abuse, family disorganizati on, domestic violence, suicide, mental illnesses, sexual abuse, corruption, Provincial level disasters in the country such as floods, landslides, and draughts etc., have emerged as major social problems connected with comprehensive social relationships Poverty and ...
What are the resources of Sri Lanka? ›
Natural resources include limestone, graphite, mineral sands, gems, and phosphate. Agricultural products include tea, rubber, coconuts, rice, and spices. Industry consists of textiles and garments, chemicals and petroleum products, food processing, wood and wood products, basic metal products, paper and paper products.
What is the unemployment rate in Sri Lanka? ›
Unemployment refers to the share of the labor force that is without work but available for and seeking employment. Sri Lanka unemployment rate for 2021 was 5.40%, a 0.48% decline from 2020.
Does Sri Lanka have a good quality of life? ›
Quality of Life - overview
Sri Lanka scores 86.4% on Quality of Life when scored against the 'Income adjusted' benchmark.
Where does Sri Lanka rank in economy? ›
Worldwide gross domestic product in 2021 was at about 12,232 USD per capita. GDP in Sri Lanka, on the other hand, reached USD 4,014 per capita, or 88.93 billion USD for the whole country. Sri Lanka is therefore currently ranked 67 of the major economies.
Is Sri Lanka common wealth? ›
Sri Lanka is a founding member of the Commonwealth, who has been heavily involved in the Commonwealth Secretariat's work on climate.
What is Sri Lanka inflation? ›
March 21 (Reuters) - Sri Lanka's National Consumer Price Index (NCPI) (LKNCPI=ECI) rose 53.6% in February on the year, after a rise of 53.2% in January, the statistics department of the debt-stricken country said on Tuesday.
What is Sri Lanka most popular for? ›
This is an island of magical proportions, once known as Serendib, Taprobane, the Pearl of the Indian Ocean, and Ceylon. Sri Lanka is famous for producing finest tea, rubber and coconut, as well as exotic spices.
What is Sri Lanka famous for producing? ›
Sri Lanka's primary food crop is rice. Rice is cultivated during two seasons. Tea is cultivated in the central highlands and is a major source of foreign exchange. Fruit, vegetables, and oilseed crops are also cultivated in the country.
Sri Lanka is famous for its lush green tea gardens and you would have surely admired them while exploring the place.
What is Sri Lanka proud of? ›
Sri Lanka is known for the beauty of its natural landscape and high biodiversity, rich resources, important history, cultural wealth and friendly people. There are close to 19 million people who call Sri Lanka their home. Sri Lanka has played an important role in history as an important part of the Silk Road.
What is the main export of Sri Lanka? ›
Sri Lanka exports mostly textiles and garments (52% of total exports) and tea (17%). Others include: spices, gems, coconut products, rubber and fish. Main export partners are United States, United Kingdom, Germany, Belgium and Italy.
What is Sri Lanka in simple words? ›
Sri Lanka is an island country located off the southern coast of India. Sri Lanka is surrounded by the Indian Ocean, Gulf of Mannar, the Palk Strait, and lies in the vicinity of India and the Maldives. The geography of Sri Lanka includes coastal plains in the north and hills and mountains in the interior.
Why do people love Sri Lanka? ›
Surrounded on all sides by the Indian Ocean, Sri Lanka boasts some of the most breathtaking beaches along its spectacular coastline. The shores in Sir Lanka have a unique charm to them and offer up some incredible swimming, fishing, snorkeling, scuba diving, surfing, sunbathing, and whale watching.
Is it safe to go to Sri Lanka now? ›
Without hesitation, we respond… “absolutely, yes it is.” There is really no doubt in our minds that Sri Lanka is generally one of the safest places to visit in Asia, if not the world. While the economic and political issues are by no means solved, they will no longer impinge in any way on travellers.
What are the 4 key economic issues? ›
Answer: The four basic problems of an economy, which arise from the central problem of scarcity of resources are:
- What to produce?
- How to produce?
- For whom to produce?
- What provisions (if any) are to be made for economic growth?
The 5 basic problems of an economy are as follows:
- What to produce and what quantity to produce?
- How to produce?
- For whom to produce the goods?
- How efficient are the resources being utilised?
- Is the economy growing?
Solutions to economic crisis
- Fiscal policy – When the government influences demand through changing spending or taxes. ...
- Monetary policy – When Central Bank influences demand and supply of money. ...
- Supply-side policies – Long-term policies to try and improve productivity and efficiency in the economy.
Sri Lankans have taken to the street in record numbers to protest economic hardships. In the face of severe economic hardships marked by power blackouts, shortages of fuel, cooking oil and food, protesters have been demanding the resignation of the Rajapaksa-led government since March 2022.
Each year, 103 500 Sri Lankans die from non-communicable diseases, such as heart disease, lung disease, stroke, cancer and diabetes. NCDs account for three in every four deaths in Sri Lanka.
What is the economic crisis in Sri Lanka for medicine? ›
Sri Lanka's economic crisis is rapidly turning into a health crisis amid growing shortages of basic drugs and medical supplies. The annual budget estimate for importing medicines and surgical consumables is 300 million US dollars; so far only 80 million US dollars is available for 2023 through donors.
What are the problems facing in Sri Lanka today? ›
Sri Lanka is experiencing an economic crisis stemming from an unsustainable debt load and perennial deficits on both the international balance of payments and the government budget, resulting in a severe shortage of foreign currency exchange (forex).
What is the worsening situation in Sri Lanka? ›
Worst crisis
Sri Lanka is facing its worst economic crisis since its independence from the United Kingdom in 1948 and has been enduring soaring inflation, power blackouts, and fuel rationing since last year. The country defaulted on its $51bn external debt in mid-April and is in talks with the IMF for a $2.9bn bailout.
What is the national food problem in Sri Lanka? ›
According to the World Food Programme, 6.3 million people, or over 30 percent of Sri Lanka's population, are "food insecure" and require humanitarian assistance.
What is the climate in Sri Lanka? ›
Sri Lanka has two main seasons, the Maha season associated with the northeast monsoon (September – March) and the Yala season associated with the southwest monsoon (May – August). With an average temperature of around 27 - 28°C, Sri Lanka is one of the hottest countries in the world.
What are the natural disasters in Sri Lanka? ›
The most frequent natural hazards that impact Sri Lanka are droughts, floods, landslides, cyclones, and coastal erosion. A rise in extreme events and natural disasters as a result of climate change is expected to pose considerable threat to Sri Lanka's economy and human health.
What is the poverty line in Sri Lanka? ›
The national poverty line was recently updated and now is based on 2013 data and therefore reflects a basket of goods required to achieve a minimum number of calories based on the prevailing expenditure patterns at that time. The value of the national poverty line Rs. 6,966 per month in 2019 prices.
What is the main employment in Sri Lanka? ›
Non agriculture sector covers 75.0 percent of employed population in Sri Lanka, employees and own account workers are highly constraining in that sector.
What is the male to female ratio in Sri Lanka? ›
In 2022 the natural increase was positive, as the number of births exceeded the number of deaths by 210,658. Due to external migration, the population declined by 102,307. The sex ratio of the total population was 0.974 (974 males per 1,000 females) which is lower than global sex ratio.
Sri Lanka's primary food crop is rice. Rice is cultivated during two seasons. Tea is cultivated in the central highlands and is a major source of foreign exchange. Fruit, vegetables, and oilseed crops are also cultivated in the country.
What are the top 3 industries in Sri Lanka? ›
Most of the primary industries in Sri Lanka rely on the country's natural resources and include agriculture, textile, apparel, tea export, and tourism.
What are the main exports of Sri Lanka? ›
Sri Lanka exports mostly textiles and garments (52% of total exports) and tea (17%). Others include: spices, gems, coconut products, rubber and fish. Main export partners are United States, United Kingdom, Germany, Belgium and Italy.
What is Sri Lanka's most valuable resources? ›
Natural resources include limestone, graphite, mineral sands, gems, and phosphate. Agricultural products include tea, rubber, coconuts, rice, and spices. Industry consists of textiles and garments, chemicals and petroleum products, food processing, wood and wood products, basic metal products, paper and paper products.
What are the three main export crops of Sri Lanka? ›
The three main traditional export crops from Sri Lanka are Tea, Rubber and Coconut.
What food does Sri Lanka import? ›
Sri Lanka imports a variety of agricultural products and food including wheat, lentils, sugar, fruit, milk, and milk products. The importation of food and beverages account for 7.2 percent of total imports in 2018. Sri Lanka is emerging as an important market for international business and tourism.
What makes Sri Lanka popular? ›
This is an island of magical proportions, once known as Serendib, Taprobane, the Pearl of the Indian Ocean, and Ceylon. Sri Lanka is famous for producing finest tea, rubber and coconut, as well as exotic spices.
What is the largest business in the Sri Lanka? ›
What is the richest company in Sri Lanka? ›
2020 list
| Rank | Name | Financial statistics in millions US$ |
|---|
| Assets |
|---|
| 1 | Ceylon Petroleum Corporation | 1,477 |
| 2 | Bank of Ceylon | 13,290 |
| 3 | Ceylon Electricity Board | 4,127 |
16 more rowsU.S. imports from Sri Lanka are mostly apparel, but also include rubber, industrial supplies, gemstones, tea, and spices. Top U.S. exports to Sri Lanka include animal feeds, medical equipment, soybeans, plastics, dairy products, wheat, cloth, and textiles.
In 2016, there were five thousand millionaires in Sri Lanka. This figure was estimated to reach 13 thousand by 2026. In comparison, the country had 80 ultra high net worth individuals (UHNWI) and 10 centa-millionaires in that year.
