The Economy of Sri Lanka

Basically, Sri Lanka is an agriculture-based economy as they became plantations of cinnamon, rubber and tea. The famous Ceylon black tea is its foremost product since the 19th century.

From 1977, under UNP, Sri Lanka adopted more market-oriented trade policies and encouragement of foreign investments and began privatizations and deregulations. However, recent changes in government administration put a halt on the privatization and deregulations that had been initiated. The current government, the Sri Lanka Freedom Party, is leaned on reducing poverty by diverting investments to areas overlooked before, on developing SMEs or small-medium enterprises, promoting agriculture and expansion of civil service. Although retaining production and exports on tea, rubber, coffee, sugar and other vital agricultural products, the government have slowly steered the country into industrialization. Before, agriculture used to comprise 93% of exports in 1970, in 2005 agriculture is only at 16.8%. While agriculture-based industries declined over the years, the telecommunications, food processing, textiles and financial sectors have flourished. As of 2005 data, textile and garments is now the number one Sri Lankan exported product. Textile and garments now accounts for 40% of total exports.

It seemed that Sri Lanka was progressing gradually when the Tamil Tigers have begun talking separation which led to a full-blown civil war since 1983. Despite the damage done by the continuing civil war, the economy recovered a bit after a ceasefire was announced in 2003. The country's outlook remains bleak as of now despite growths in some non-traditional industries as long as the threat of the Tamil Tigers casts a shadow in the security of the country.