Editing Economy of Sri Lanka (section)

== Economic history ==

===Early history===

Sri Lanka has a long history as a trading hub as a result of being located at the centre of east–west trade and irrigated agriculture in the hinterland, which is known from historical texts surviving within the island and from accounts of foreign travellers. The island has [[Sri Lankan irrigation network|irrigation reservoirs]] called tanks built by ancient Kings starting after Indo-Aryan migration, many of which survive to this day.<ref>{{cite web |url= https://mahavamsa.org/mahavamsa/original-version/10-consecrating-pandukabhaya/|title= Chapter 10, Consecrating Pandukabhaya |publisher=[[Mahavamsa]] |website=Mahavamsa.org |date= 8 October 2011 |access-date=11 December 2020}}</ref> They form part of an irrigation system interlinked with more modern constructions.<ref>{{cite web |url= http://www.fao.org/3/T0028E/T0028E03.htm
|title= Reservoirs - Historical Aspects |publisher=[[FAO]] |website=fao.org |access-date=11 December 2020}}</ref>

[[Faxian]] (also Fa Hsien) a Chinese Monk who travelled to India and Sri Lanka around 400 AD, writes of existing legends at his time of merchants from other countries trading with native tribal peoples in the island before [[Sinhalese people|Indo-Aryan settlement]].  "The country which originally had no human inhabitants but was occupied by spirits and [[Naga people (Lanka)|nagas]] (serpent worshipers) with which merchants of various countries carried on a trade," Faxian wrote in 'A Record of Buddhistic Kingdoms'.<ref name="Project Gutenberg">{{cite web |url= https://www.gutenberg.org/files/2124/2124-h/2124-h.htm#link2HCH0039 |title= 'A Record of Buddhistic Kingdoms - Chapter 38 |publisher=[[Project Gutenberg]] |website=Gutenberg.org |access-date=11 December 2020}}</ref> He writes of precious stones and pearl fisheries with a 30% tax by the king.

The monk had embarked "in a large merchant vessel" from India to arrive in the island.<ref name="Project Gutenberg"/> To go back to China he "took passage in a large merchantman on board which were more than 200 men", ran into a storm where the merchants were forced to throw part of the cargo overboard and arrived at Java-dvipa (Indonesia), showing Sri Lanka had active coastal and long-distance maritime trade links.<ref>{{cite web |url= https://www.gutenberg.org/files/2124/2124-h/2124-h.htm#link2HCH0039 |title= 'A Record of Buddhistic Kingdoms - Chapter 40 |publisher=[[Project Gutenberg]] |website=Gutenberg.org |access-date=11 December 2020}}</ref>

[[Cosmas Indicopleustes]] (Indian Voyager), a merchant/monk from [[Alexandria]] of Egypt, who visited the Indian sub-continent in the 6th century, wrote in detail about Sri Lanka as a centre of commerce, referring to the island as Taprobane and Sieladiba.

"The island being, as it is, in a central position, is much frequented by ships from all parts of India and from Persia and Ethiopia, and it likewise sends out many of its own," he wrote in Christian Topography.  "And from the remotest countries, I mean Tzinista [China] and other trading places, it receives silk, aloes, cloves, sandalwood and other products, and these again are passed on to marts on this side, such as Male [Malabar or South West Indian coast] ... and to Calliana [Kalyana]... This same Sielediba then, placed as one may say, in the centre of the Indies and possessing the hyacinth [sapphire] receives ... and in turn exports to them, and is thus itself a great seat of commerce."<ref>{{cite web |url= https://archive.org/details/christiantopogr00cosmgoog |title= Christian Topography |publisher=[[Internet Archive]] |website=archive.org |year= 1897 |access-date=11 December 2020}}</ref>

===Independence to 1977===

Sri Lanka was ahead of many Asian nations and had economic and social indicators comparable to Japan when they gained independence from the British in 1948.

Sri Lanka's social indicators were considered "exceptionally high".  Literacy was already 21.7% by the late 19th century. A Malaria eradication policy of 1946 had cut the death rate from 20 per thousand in 1946 to 14 by 1947. Life expectancy at birth of a Sri Lankan in 1948 at 54 years was just under Japan's 57.5 years. Sri Lanka's infant mortality rate in 1950 was 82 deaths per thousand live births, Malaysia 91 and Philippines 102.<ref name="GrowthEquity">{{cite web |url= http://documents1.worldbank.org/curated/en/570211468777272881/pdf/multi-page.pdf |title= Growth and Equity in Developing Countries - Surjit S Bhalla, Paul Glewwe |publisher=[[World Bank]] |website=worldbank.org |access-date=18 December 2020}}</ref>

With its strategic location in the Indian Ocean, Sri Lanka was expected to have a better chance than most other Asian neighbours to register a rapid economic take-off and had "appeared to be one of the most promising new nations." But the optimism in 1948 had dimmed by 1960, due to wrong economic policies and mismanagement.

East Asia was gradually overtaking Sri Lanka.  In 1950 Sri Lanka's un-adjusted school enrolment ratio as a share of the 5-19 year age group was 54%, India 19%, Korea 43% and the Philippines 59%.  But by 1979 Sri Lanka's school enrollment rate was 74%, but the Philippines had improved to 85% and Korea was 94%.<ref name="GrowthEquity" />

Sri Lanka had inherited a stable macro-economy at independence.<ref name="whatwent">{{cite journal |last1=Kelegama |first1=Saman |year=2000 |title=Development in Independent Sri Lanka: What went wrong? |url=https://www.jstor.org/stable/4409207 |journal=[[Economic and Political Weekly]] |volume=35 |issue=17 |pages=1477–1490 |jstor=4409207 |access-date=18 December 2020}}</ref> A central bank was set up and Sri Lanka became a member of the IMF entering the [[Bretton Woods system]] of currency pegs on August 29, 1950.<ref>{{cite web |url=https://www.imf.org/en/Countries/LKA |title= Sri Lanka and the IMF |publisher=[[IMF]] |website=imf.org |access-date=18 December 2020}}</ref> By 1953 exchange controls were tightened with a new law.<ref>{{cite web |url=https://www.srilankalaw.lk/Volume-III/exchange-control-act.html |title=Exchange Control Act No 24 of 1953 |publisher=[[Blackhall Publishing]] |website=srilankalaw.lk |access-date=18 December 2020 |archive-date=21 July 2021 |archive-url=https://web.archive.org/web/20210721064151/https://www.srilankalaw.lk/Volume-III/exchange-control-act.html |url-status=dead }}</ref>

The economy was then progressively controlled and relaxed in response to foreign exchange crises as monetary and fiscal policies deteriorated. Controls and restrictions in 1961-64 were followed by partial liberalization in 1965–70. Controls were continued after a devaluation in the wake of 1967 [[Devaluation|Sterling Crisis]]. Controls were tightened from 1970 to 1977 alongside the [[Nixon shock|collapse of the Bretton Woods system]]. "In sum it was a story of tightening partial relaxing, and again tightening the trade regime and associated areas to over a perceived foreign exchange crisis," writes economist [[Saman Kelegama]] in 'Development in Independent Sri Lanka what went wrong'. "In the early 1960s strategy for dealing with the foreign exchange crisis was the gradual isolation of the economy from external market forces. It was the beginning of a standard import-substitution industrial regime with all the controls and restrictions associated with such a regime. Expropriation and state intervention in economic activities was common."<ref name="whatwent" />

In 1960 Sri Lanka's (then Ceylon) per capita GDP was 152 dollars, Korea 153, Malaysia 280, Thailand 95, Indonesia 62, Philippines 254, Taiwan 149.  But by 1978 Sri Lanka's per capita GDP was 226, Malaysia's 588, Indonesia's 370 and Taiwan's 505.<ref name="GrowthEquity" />

The 1970s also saw an uprising in the south from the [[1971 JVP Insurrection (Sri Lanka)|JVP insurrection]], and the roots of a [[Sri Lankan civil war|civil war]] in the North and the East.

===Post 1977 period===

In 1977, Colombo abandoned statist economic policies and its import substitution industrialisation policy for market-oriented policies and export-oriented trade. Sri Lanka would after that be known to handle dynamic industries such as food processing, textiles and apparel, food and beverages, telecommunications, and insurance and banking. In the 1970s, the share of the middle class increased.<ref name=":1">{{Cite web |agency=Associated Press |date=2022-06-22 |title=Sri Lanka's prime minister says economy has 'completely collapsed' |url=https://www.theguardian.com/world/2022/jun/23/sri-lanka-prime-minister-economy-completely-collapsed |access-date=2022-06-29 |website=The Guardian |language=en}}</ref>

Between 1977 and 1994 the country came under [[United National Party|UNP]] rule in which under President [[Junius R. Jayewardene|J.R Jayawardana]] Sri Lanka began to shift away from a [[socialist]] orientation in 1977. Since then, the government has been deregulating, privatizing, and opening the economy to international competition. 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 [[UPFA]] government has concentrated on the mass production of goods for domestic consumption such as rice, grain and other agricultural products.<ref>{{cite web|url=http://www.adb.org/sites/default/files/ADO/2008/SRI.pdf|title=Asian Development Outlook 2008|publisher=Asian Development Bank}} {{dead link|date=April 2018 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>
however twenty-five years of [[Sri Lankan civil war|civil war]] slowed economic growth,{{citation needed|date=December 2015}} diversification and liberalisation, and the political group [[Janatha Vimukthi Peramuna]] (JVP) uprisings, especially the second in the early 1980s, also caused extensive upheavals.<ref>{{cite web|url=http://www.postcolonialweb.org/southasia/srilanka/economics/economics1.html|title=The Economy of Sri Lanka|publisher=The Postcolonial Web-National University of Singapore}}</ref>

Following the quelling of the JVP insurrection, increased [[privatization]], economic reform and the stress on export-oriented growth helped improve economic performance, increasing GDP growth to 7% in 1993. By 1996 plantation crops made up only 20% of exports (compared with 93% in 1970), while textiles and garments accounted for 63%. GDP grew at an annual average rate of 5.5% throughout the 1990s until a drought and a deteriorating security situation lowered growth to 3.8% in 1996.

The economy rebounded in 1997–98 with a growth of 6.4% and 4.7% – but slowed to 3.7% in 1999. For the next round of reforms, the central bank of Sri Lanka recommends that Colombo expand market mechanisms in nonplantation agriculture, dismantle the [[government]]'s monopoly on wheat imports, and promote more competition in the financial sector. Economic growth has been uneven in the ensuing years as the economy faced a multitude of global and domestic economic and political challenges. Overall, average annual GDP growth was 5.2% over 1991–2000.

In 2001, however, GDP growth was negative 1.4% – the first contraction since independence. The economy was hit by a series of global and domestic economic problems and was affected by terrorist attacks in Sri Lanka and the [[United States]]. The crises also exposed the fundamental policy failures and structural imbalances in the economy and the need for reforms. The year ended in parliamentary elections in December, which saw the election of [[United National Party]] to Parliament, while [[Sri Lanka Freedom Party]] retained the presidency.

During the short-lived peace process from 2002 to 2004, the economy benefited from lower [[interest rate]]s, a recovery in domestic demand, increased [[tourism|tourist arrivals]], a revival of the stock exchange, and increased foreign direct investment (FDI). In 2002, the economy experienced a gradual recovery. During this period Sri Lanka has been able to reduce defense expenditures and begin to focus on getting its large, public sector debt under control. In 2002, economic growth reached 4%, aided by strong [[service sector]] growth. The [[agricultural sector]] of the economy staged a partial recovery. Total FDI inflows during 2002 were about $246 million.<ref>{{Cite web|url=http://www.factrover.com/economy/Sri_Lanka_economy.html|title=Sri Lanka Economy – GDP, Budget, Industry and Agriculture|publisher=factrover|access-date=22 April 2016|archive-date=4 May 2019|archive-url=https://web.archive.org/web/20190504180340/http://www.factrover.com/economy/Sri_Lanka_economy.html|url-status=dead}}</ref>

The [[Mahinda Rajapaksa|Mahinda Rajapakse]] government halted the privatization process and launched several new companies as well as re-nationalising previous state-owned enterprises, one of which the courts declared that privatization is null and void.<ref>{{Cite news |url= http://www.sundaytimes.lk/090607/FinancialTimes/ft316.html|title=SLI privatization null and void, reverts back to the state }}</ref> Some state-owned corporations became overstaffed and less efficient, making huge losses with series of frauds being uncovered in them and nepotism rising.<ref>{{cite web|url= http://www.economynext.com/Sri_Lanka_aiming_to_reduce_burden_of_SOEs_on_the_people-3-3315-1.html|title= Sri Lanka aiming to reduce burden of SOEs on the_people|access-date= 17 November 2015|archive-url= https://web.archive.org/web/20151118070627/http://www.economynext.com/Sri_Lanka_aiming_to_reduce_burden_of_SOEs_on_the_people-3-3315-1.html|archive-date= 18 November 2015|url-status= dead}}</ref> During this time, the [[European Union|EU]] revoked [[Generalized System of Preferences|GSP]] plus preferential tariffs from Sri Lanka due to alleged human rights violations, which cost about US$500 million a year.<ref>{{Cite news|title = Sri Lanka Loses E.U. Trade Benefit|url = https://www.nytimes.com/2010/07/07/business/global/07trade.html|newspaper = The New York Times|date = 6 July 2010|access-date = 17 November 2015|issn = 0362-4331|first = Vikas|last = Bajaj}}</ref><ref>{{Cite news |title = GSP Plus suspension will cost Lanka Rs. 570 billion a year|url = http://www.sundaytimes.lk/100704/News/nws_02.html|newspaper = Sunday Times |access-date = 17 November 2015}}</ref>

The resumption of the civil war in 2005 led to a steep increase in defence expenditures. The increased violence and lawlessness also prompted some donor countries to cut back on aid to the country.<ref>{{Cite news|last=Fernandez|first=Minelle|date=28 July 2007|title=Lawlessness Grows in Strife-Torn Sri Lanka|url=https://www.washingtonpost.com/wp-dyn/content/article/2007/07/27/AR2007072702462.html|access-date=26 April 2021|newspaper=[[The Washington Post]]}}</ref><ref>{{Cite web|last=Hogg|first=Charu Lata|title=Sri Lanka's leader takes a step backward on human rights|url=http://hrw.org/english/docs/2007/08/15/slanka16690_txt.htm|url-status=dead|archive-url=https://web.archive.org/web/20070929144522/http://hrw.org/english/docs/2007/08/15/slanka16690_txt.htm|archive-date=29 September 2007|access-date=26 April 2021|website=[[Human Rights Watch]]}}</ref>

A sharp rise in world petroleum prices combined with the economic fallout from the civil war led to inflation that peaked at 20%.{{Citation needed|date=April 2021}}

===Post-civil war period===

Pre-2009, there was a continuing cloud over the economy with the civil war and fighting between the [[Government of Sri Lanka]] and the [[LTTE]]; however, the war ended with a resounding victory for the Sri Lankan Government on 19 May 2009 with the total elimination of the LTTE.{{Citation needed|date=April 2021}}

As the civil war ended in May 2009 the economy started to grow at a higher rate of 8.0% in the year 2010 and reached 9.1% in 2012, mostly due to the boom in non-tradable sectors; however, the boom did not last and the GDP growth for 2013 fell to 3.4% in 2013, and only slightly recovered to 4.5% in 2014.<ref>{{cite web|url=https://2009-2017.state.gov/r/pa/ei/bgn/5249.htm|title=Background Note: Sri Lanka->section "Economy"|publisher=US State Department}}</ref><ref>{{Cite web|url=http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/lk-8S?display=graph|title=GDP growth (annual %) {{!}} Data {{!}} Graph|publisher=The World Bank.|access-date=26 June 2016}} {{Dead link|date=August 2018 |bot=InternetArchiveBot |fix-attempted=yes }}</ref><ref>{{Cite news |url=http://www.ft.lk/article/77212/Sri-Lanka-s-post-war-economic-miracle-turns-sour|title=Sri Lanka's post-war economic miracle turns sour!|publisher=Da|access-date=26 June 2016}}</ref><ref>{{Cite web|url=https://thecurionomist.wordpress.com/2014/05/04/construction-bias-in-sri-lankas-recent-growth/|title=Construction Bias in Sri Lanka's Recent Growth|last=thecurionomist|date=4 May 2014|publisher=The Curionomist|access-date=26 June 2016}}</ref>

According to government policies and economic reforms stated by Prime Minister and Minister of National Policy and Economic Affairs [[Ranil Wickremesinghe]], Sri Lanka plans to create [[Western Region Megapolis]] a [[Megalopolis (city type)|Megapolis]] in the western province to promote economic growth. The creation of several business and technology development areas island-wide specialised in various sectors, as well as tourism zones, are also being planned.<ref>{{Cite news|title = Economic Policy Statement made by Prime Minister, Ranil Wickremesinghe in Parliament|url = http://www.news.lk/fetures/item/10674-economic-policy-statement-made-by-prime-minister-ranil-wickremesinghe-in-parliament|publisher = news.lk|access-date = 17 November 2015|archive-date = 22 April 2019|archive-url = https://web.archive.org/web/20190422111151/https://www.news.lk/fetures/item/10674-economic-policy-statement-made-by-prime-minister-ranil-wickremesinghe-in-parliament|url-status = dead}}</ref><ref name="Daily News 2015-11-16">{{cite news |title=Govt pushing for GSP+, TPP membership – Dr. Harsha |newspaper=Daily News |url=http://www.dailynews.lk/?q=2015/11/16/business/govt-pushing-gsp-tpp-membership-dr-harsha |access-date=17 November 2015}}</ref><ref name="Sunday Times 2015-11-15">{{cite news |author=S. Rubatheesan |date=15 November 2015 |title = EU delegation to meet Ranil before taking decision on ban on Sri Lankan fish products |newspaper=The Sunday Times Sri Lanka |url = http://www.sundaytimes.lk/151115/news/eu-delegation-to-meet-ranil-before-taking-decision-on-ban-on-sri-lankan-fish-products-171822.html |access-date = 17 November 2015}}</ref><ref>{{Cite web|url=https://archives.sundayobserver.lk/2016/02/28/new40.asp|title=Sri Lanka to join Trans-Pacific Partnership? |newspaper=Sunday Observer |access-date=22 April 2016|url-status=live|archive-url=https://web.archive.org/web/20160302164906/http://www.sundayobserver.lk/2016/02/28/new40.asp|archive-date=2 March 2016|df=dmy-all}}</ref> In the mid to late 2010s, Sri Lanka faced a danger of falling into economic malaise, with increasing debt levels and a political crisis which saw the country's debt rating being dropped.<ref>{{cite news|url=https://www.ft.com/content/5c9dade6-f767-11e8-af46-2022a0b02a6c |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/5c9dade6-f767-11e8-af46-2022a0b02a6c |archive-date=10 December 2022 |url-access=subscription |url-status=live|title=S&P, Fitch downgrade Sri Lanka's debt rating amid political crisis|website=Financial Times|date=4 December 2018 |language=en-GB|access-date=2018-12-22}}</ref>
In 2016 the government succeeded in lifting an EU ban on Sri Lankan fish products which resulted in fish exports to EU rising by 200% and in 2017 improving human rights conditions resulted in the European Commission proposing to restore GSP plus facility to Sri Lanka.<ref name="Daily News 2015-11-16" /><ref name="Sunday Times 2015-11-15" /><ref>{{cite news|url=http://www.dailymirror.lk/article/European-Commission-proposes-GSP-Plus-to-SL-122058.html|title=European Commission proposes GSP Plus to SL|access-date=12 January 2017}}</ref><ref>{{cite news|url=http://www.dailymirror.lk/108463/EU-lifts-fish-ban-on-Sri-Lanka|title=EU lifts fish ban on Sri Lanka|access-date=12 January 2017}}</ref> Sri Lanka's tax revenues per GDP also increased from 10% in 2014, which was the lowest in nearly two decades to 12.3% in 2015.<ref>{{cite web|title=Tax revenue (% of GDP) Sri Lanka|url=https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS?locations=LK|publisher=The World Bank|access-date=8 November 2017}}</ref> Despite reforms, Sri Lanka was listed among countries with the highest risk for investors by Bloomberg.<ref>{{cite news|url=http://www.dailymirror.lk/article/Bloomberg-ranks-Sri-Lanka-among-highest-risk-countries-for-investors-122610.html|title=Bloomberg ranks Sri Lanka among highest risk countries for investors|access-date=24 September 2017}}</ref> Growth also further slowed to 3.3% in 2018 and 2.3% in 2019.<ref>{{cite web |url=http://www.statistics.gov.lk/NationalAccounts/StaticalInformation/Reports/ts_annual_constant |title= Annual Gross Value added at Constant Prices |publisher=[[Department of Census and Statistics Sri Lanka]] |website=statistics.gov.lk |access-date=4 December 2020}}</ref> The rupee fell from 131 to the US dollar to 182 from 2015 to 2019, inflating foreign debt and slowing domestic consumption ending a period of relative stability.<ref>{{cite news|url=https://www.reuters.com/article/sri-lanka-forex/sri-lankan-rupee-closes-near-record-low-idUSL4N1WB3AY |title= Sri Lankan rupee closes near record low |newspaper=[[Reuters]]|access-date=3 December 2020}}</ref> China became a top creditor to Sri Lanka over the last decade, overtaking Japan and the World Bank.<ref>{{cite news|url=https://economynext.com/china-overtakes-japan-world-bank-as-key-sri-lanka-creditor-71001/|title=China overtakes Japan, World Bank as key Sri Lanka creditor|newspaper=[[EconomyNext]]|access-date=4 December 2020}}</ref>

The main economic sectors of the country are [[tourism]], [[Tea Industry of Sri Lanka|tea export]], [[Apparel industry|apparel]], [[Apparel industry of Sri Lanka|textile]], [[Rice|rice production]] and other [[Agriculture in Sri Lanka|agricultural products]]. In addition to these economic sectors, overseas employment contributes highly to foreign exchange.<ref>{{Cite web|title=What are the main contributing sectors of Sri Lankan economy?|url=https://lmd.lk/what-are-the-main-contributing-sectors-of-sri-lankas-economy/|access-date=2020-12-01|website=lmd.lk|date=8 September 2017 }}</ref>

[[File:Sri Lanka bonds.webp|thumb|300px|Sri Lanka bonds spiked in 2022 <br /> [[Inverted yield curve]] in the first half of 2022
{{legend-line|#FFBE29 solid 3px|15 year bonds}}
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[[File:USD to Sri Lankan Rupee Exchange Rate.webp|thumb|300px|[[United States dollar|USD]] / [[Sri Lankan rupee|Sri Lankan Rupee]] [[exchange rate]].<br />In early March 2022, the Sri Lankan Rupee began losing value quickly.]]

As of the early 2020s, the debt-laden country is undergoing an [[2019–present Sri Lankan economic crisis|economic crisis]] where locals are experiencing months of shortages of food, fuel and electricity. Inflation has peaked at 57% according to official data.<ref name=":1" /> In April 2022, Sri Lanka declared a [[Sri Lanka sovereign default|sovereign default]].<ref>{{cite web|website=[[EconomyNext]]|date=2022-04-12|title=Sri Lanka halts foreign debt repayments in 'pre-emptive negotiated default'|url=https://economynext.com/sri-lanka-halts-foreign-debt-repayments-in-pre-emptive-negotiated-default-92952/}}</ref> In June 2022, Prime Minister [[Ranil Wickremesinghe]] declared in parliament the collapse of the Sri Lankan economy, leaving it unable to pay for essentials.<ref>{{Cite web |title=Sri Lanka's PM says its debt-laden economy has 'collapsed' |url=https://news.sky.com/story/sri-lankas-pm-says-its-debt-laden-economy-has-collapsed-12638329 |access-date=2022-06-22 |work=Sky News  }}</ref>