Economical overview
Sri Lanka has good basic prerequisites for
getting a good economy: a broad economic base with
income from different industries, as well as a fairly
good public health and a relatively high level of
education among the residents. Nevertheless, the country
is both indebted and dependent on aid, and many Lankes
live in poverty. The long civil war (1983–2009) is only
partly an explanation for it.
The Sri Lankan governments have been pursuing a
liberal economic policy since the 1980s with
liberalization and privatization (see Modern History).
The country's two competing parties, right-wing UNP and
left-wing SLFP, have roughly the same market economy
program, although SLFP advocates a larger role for the
state in the economy than UNP.
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Countryaah.com:
Major imports by Sri Lanka, covering a full list of top products imported by the country and trade value for each product category.
The main focus of the economy has shifted from
agriculture to service and industry. In the 1970s, tea,
coconut and rubber accounted for 90 percent of export
earnings. Subsequently, these goods' share of exports
fell. Instead, the manufacturing industry, primarily the
textile industry, has become increasingly important for
exports. Clothing and textiles are now the single
largest export products (45 percent of exports in
2018).
However, the manufacturing industry's share of GDP
has not increased to the same extent. Instead, the
construction industry and the service sector have grown,
in particular tourism and financial services. The
service sector also includes a large state
administration and relatively well-developed social
services. Tourism has gained momentum since the end of
the war. The IT and telecom sectors have also grown
strongly.
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Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including LKA which represents the country of Sri Lanka.
Deficits in the Treasury and foreign trade
Sri Lanka's export revenues are not enough to cover
the cost of imports, and since the 1950s, the country
has been suffering from trade deficits abroad. In the
1970s, the government tried to rectify the current
account deficit by raising tariffs against the outside
world and building up a domestic industry that would
produce replacement goods for traditional imports. But
the plans failed and thus the trade was deregulated and
the country invested in developing industries for
export.
The deficit in trade is covered by foreign loans and
aid, as well as by money sent home by about 1.7 million
people who work abroad. The country therefore has a
considerable foreign debt. As a result of the debt
burden, economic development has been largely controlled
by credit institutions such as the World Bank and the
IMF. In exchange for loans, the institutes have, among
other things, demanded that Sri Lanka implement
privatizations and cuts in the public sector.
The civil war brought severe stress to the economy as
large resources went to the military. But the economic
collapse suffered by many war-torn countries did not
occur in Sri Lanka. The reason was that the war was
mainly fought on one third of the land area, the eastern
and northern parts, where one seventh of the residents
live and who contribute one tenth of GDP. In the
war-torn Tamil-dominated areas, however, economic
development stagnated, or turned downward.
Tourism was negatively affected in the country as a
whole, but other basic industries based in the south and
west were not affected to the same extent. Expenditure
on the war helped drive economic growth at the national
level, and it remained steady throughout the period.
Debt and payment crisis
The reconstruction after the end of the war increased
the pressure on growth and attracted foreign investors
to the country. However, as early as 2009, Sri Lanka was
in a payment crisis as a result of falling export
revenues, declining contributions from foreigners and
high oil prices. The shortage of foreign currency became
acute and Sri Lanka was forced to apply for a loan of $
2.6 billion from the IMF - more than the country
received from the IMF in the previous 30 years.
The government tightened the lashing strap and the
state's expenditures were gradually slimmed down as more
fees and taxes began to be collected. Nevertheless, the
state's finances did not collapse and even today there
are large deficits in the state budget.
In early 2016, the government was forced to re-apply
for a loan from the IMF since the country was in a new
acute debt crisis. The Rajapaksa government had borrowed
around eight billion dollars from China and the Sirisena
government had spent a lot of money at the beginning of
its term to fulfill election promises. In March,
Sirisena decided on a number of tax increases, a planned
reduction in corporate tax was postponed in the future
and capital gains tax was reinstated. The following
month, the IMF granted a three-year loan totaling $ 1.5
billion to support the government's efforts to boost
economic growth and increase tax revenue. A domestic
political crisis in 2018 (see Current policy) caused the
IMF to extend the loan deadline by one year to 2020.
One of President Gotabhaya Rajapaksa's first measures
after his government took office in the fall of 2019 was
to lower a number of taxes in an attempt to boost the
country's crisis economy. Among other things, the VAT
was lowered on certain goods to stimulate private
consumption, and corporate taxes were lowered to
facilitate the industry.
FACTS - FINANCE
GDP per person
US $ 4,102 (2018)
Total GDP
US $ 88,901 million (2018)
GDP growth
3.2 percent (2018)
Agriculture's share of GDP
7.9 percent (2018)
Manufacturing industry's share of GDP
16.2 percent (2018)
The service sector's share of GDP
56.8 percent (2018)
Inflation
4.1 percent (2019)
Government debt's share of GDP
83.3 percent (2018)
External debt
US $ 50 142 million (2017)
Currency
langesisk rupee
Merchandise exports
US $ 11,890 million (2018)
Imports
US $ 22,233 million (2018)
Current account
- US $ 2,814 million (2018)
Commodity trade's share of GDP
39 percent (2018)
Main export goods
clothing and textiles, tea, gemstones, coconut,
rubber, jewelry, spices 1
Largest trading partner
Exporting countries: USA, UK, India, Germany.
Importing countries: China, India, United Arab Emirates
2
- 2017
2. 2017
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