Sri Lanka

THE DEMOCRATIC Socialist Republic of Sri Lanka, earlier known as Ceylon, became independent from British colonial rule in 1948. Its ranking in the Human Development Index (HDI) is the highest on the Indian subcontinent. Sri Lanka's Gender Development Index (GDI) was 69 percent in 2005, showing a level of human development better than the world average of 64 percent. But the ongoing war with Tamil secessionists and a mismanaged bureaucracy have hampered its social and economic development.

Sri Lanka was following the path of a socialist economy until 1977. The liberalization of its economy witnessed considerable progress, but the conflict with the Liberation Tigers of Tamil Eelam (LTTE) resulted in slowing down the growth rate of the country. In a war-ravaged economy, social inequality and poverty increased.

In the beginning of this century, Sri Lanka did not make much progress on social and economic fronts. There was a negative growth rate of 0.6 percent and a decrease of Gross Domestic Product (GDP) by 3.7 percent. The Gross National Product (GNP) decreased by1.3 percent in 2001. The public debt was a staggering 104.3 percent of GDP in 2004. The cost of war was increasing. It was about five percent of GDP in 2000, whereas the figure was 1.3 percent of GDP in 1982. The foreign exchange reserve of the country was decreasing.

The percentage of people below the poverty line was 22 (1997), with 88 percent living in rural areas. Before the cease-fire of 2002 with LTTE, the economy was reeling under the protracted war, and economic progress was jeopardized. The closure of 745 small-scale industries in 2001 through privatization threatened job security. The share of the health sector was only 1.4 percent of GDP. Malnutrition became a menace because of food insecurity. The increase in prices and wage stagnation deprived people of a proper diet.

In rural areas, the condition of self-employed women was miserable. The women working abroad made a substantial contribution to national income, but the government did not take sufficient steps to check [Page 1021]their conditions. The people suffered from taxes imposed to defray the cost of war. The conflict with LTTE left a trail of death, maimed bodies, life in refugee camps, and loss of property and livelihood. Even children were recruited in the war.

The government took measured steps after the end of the conflict to ensure economic development. The task before the nation was to increase employment and productivity, generate resources, and overcome budget deficits for economic growth and the reduction of poverty. The government is envisioning job recruitment of two million in coming years.

The rate of unemployment declined to 7.8 percent in 2004. Experts point out that public debt must be brought under control, otherwise it will grow faster than the economy of the country. The Relief, Rehabilitation and Reconciliation (RRR) program was launched to meet the bare necessities of people, promoting improved economic conditions. Increasing the productivity level and investment was emphasized. The implementation of the poverty reduction strategy by the government was facilitated by the assistance of $4.5 billion from international donors.

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