Latest Publications

The “State of the Economy” report is an annual publication of the Institute of Policy Studies of Sri Lanka (IPS). The report provides an assessment of Sri Lanka’s economic performance in 2007/08 and comments on the outlook in the context of developments in the global economy. The report also highlights topical issues of medium-term policy relevance for the Sri Lankan economy.

The 2008 report notes that while the Sri Lankan economy has been performing creditably to post an annual average growth rate of 6.9 per cent during 2005-07, higher growth has also been accompanied by a weakening of macroeconomic stability. Despite a much tighter monetary policy stance adopted in 2007, the lagged effects of past excesses in monetary aggregates – and cost push effects from price increases in fuel and food – have ensured a continuation of inflationary pressures into 2008.

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Population Ageing, Policy Responses and Options to Extend Retirement Coverage:
Case Study of Sri Lanka
by Nirosha Gaminiratna
Demographic Transition and Pension Series No. 7, May 2007

Sri Lanka is experiencing rapid demographic changes with an ageing of its population. This publication takes Sri Lanka as a case study to examine the ageing patterns in the country, with a view to better understanding the status of elderly and the adequacy and coverage of the present system of retirement benefits in the country. The study finds that the old-age dependency is increasing in Sri Lanka , although the economic dependency has remained stable. Only a quarter of Sri Lanka 's working age population is found to be covered by retirement benefits, indicating a need to redistribute income from workers to non-workers in order to achieve comprehensive retirement coverage. The study argues for a means tested retirement scheme, as a universal pension benefit would not be affordable to the country in the medium to long-term.

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Disaster Management Policy and Practice in Sri Lanka: Sharing Lessons among Government, Civil Society and Private Sector
Environmental Economic Policy Series, No. 11, April 2007

This publication which was prepared by the IPS as an outcome of a study that the Institute undertook in collaboration with Oxfam America provides recommendations to the government, NGOs and other stakeholders in formulating best practices and improving policy on disaster management in Sri Lanka

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Population projections are essentially concerned with future growth, and are utilized to assess the plausible demographic situations of a country through an understanding of the processes that may lead to a particular scenario at a future date, as well as to highlight what implications could be expected in the future as a result. It is also useful for users of such projections to discuss the extent of departures from the actual turn-out, as well as to indicate the record of accuracy in previous projections made for Sri Lanka.

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Utilization of Preferential Trade Arrangements: Sri Lanka 's Experience with the EU and US GSP Schemes
by Janaka Wijayasiri
International Economics Series No. 8, January 2007

Development under Stress
Sri Lankan Economy in Transition
by Saman Kelegama

(Sage Publications, New Delhi, India, 312 pages/0-7619-3536-3)

Part I on Fifty Years of Economic Development & the Challenge Ahead carries two chapters, namely; Economic Development during the 50 Years of Independence: What Went Wrong?, and; Pre-Conditions for Achieving ‘NIC Status’.

Part II on Debate on Economic Liberalization has two chapters, viz. Stabilization and Adjustment: A Second Look at the Experience of 1977-93; and Does Leadership Matter in the Economic Reform Process? Liberalization and Governance during 1989-93?

Part III on Macroeconomic Management has four chapters, viz. The Economic Cost of the North and East Conflict; Free Float of Currency, Budget 2001, and the IMF Package: Managing the Economy During Turbulent Times: 2000-2001; Managing the Economy at a Time of Terrorism and War and Prospects After the 2002 Ceasefire Agreement; and Transforming the Conflict Using an Economic Dividend: The Experience during 2002-03.

Part IV on Sectoral Policy has four chapters, viz. Industrialization: An Overview; Ready-Made Garment Industry: Preparing to Face the Global Challenge; Market Reform and Diversification in Agriculture; and Food Security Issues.

Part V on Employment and Poverty has two chapters focusing on: Structural Adjustment and Employment Creation, and The Poverty Situation and Policy.

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Rural Land Sector in Sri Lanka : Major Characteristics, Determinants and Implications for Land Policy
by Parakrama Samaratunga and Dilhani Marawila
Agriculture Economic Policy Series No. 7

Inequity, poverty and inefficient land use observed at all social strata in Sri Lanka are primarily attributed to lack of a coherent land policy and failure to adopt sustainable land management practices. Land use, property rights related to land, and allocation of land have been largely affected by the inconsistent policy environment of the country and a number of conflicting issues have arisen as a result. The objective of this publication is aimed at answering the basic question whether the state land policies and institutional changes have led to efficient land use and the well-being of the land users of Sri Lanka . Further, the publication lays emphasis on the semi-urban and rural land sector, which enables it to explore deeply the micro environment related to the land sector within a general macro setting.

Table of Contents (PDF Format 56kb)

View the first chapter on Policy Perspectives (PDF Format 57kb)

Microfinance has attracted a great deal of international attention in recent years, as an effective tool for reducing poverty and improving welfare of households. In Sri Lanka , provision of financial services to the poor has a long history dating back to the early year of the twentieth century. Particularly during the last two decades, microfinance sector has expanded significantly, embracing all the sectors in the country namely governmental, non-governmental and co-operative sectors. Nevertheless, unavailability of proper records on the existing literature has constrained their access and dissemination to a large group of stakeholders in the microfinance sector. In the context, IPS made an effort to compile and document the details of the existing literature on microfinance in Sri Lanka published during 1980-2005. This 'Annotated Bibliography' contains details of over one hundred documents related to microfinance including books, reports, journal articles and papers presented at international and national conferences/workshops.

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The use of Social Accounting Matrices (SAMs) has a long history similar to the input-output (I-O) accounting approach. Although a large number of SAMs have been developed for many other developing countries in recent years under the International Food Policy Research Institute (IFPRI) and the Micro Impact of Macro Adjustment Policies (MIMAP) research projects, not a single detailed SAM has been compiled for Sri Lanka (except for a few aggregated SAMs) for the last three decades. Therefore, there has been an urgent need to compile a SAM for Sri Lanka to develop effective policies and to undertake effective economic policy analyses using an economy-wide modelling framework.To fulfill the above need, the paper introduces a systematic framework to construct a SAM for the Sri Lankan economy following the methods developed in compiling recent SAMs for some other developing countries. This publication develops a framework and the procedures for compiling a SAM for Sri Lanka. To illustrate this framework, a disaggregated SAM is developed with 1995 as the base year.

This publication seeks to assess the experience of the functioning of the Provincial council system in Sri Lanka since its introduction in 1987 and, offer a more relevant approach to policies, structures and processes that would contribute to the achievement of an effective devolutionary system. It further proceeds to suggest how such an approach could be realistically introduced and implemented in the Sri Lankan context. The analysis of the past experience is placed in the context of the history and culture of governance in Sri Lanka . The publication further discusses the post-1987 experience in regard to the sharing of governance responsibilities within the polity, the reality of fiscal devolution, the management of public human resources, issues of accountability and transparency as well as the setting of intra-provincial structures. In offering its suggestions for strengthening of the future devolved polity, the publication focuses on issues related to the sharing of governance responsibilities, the introduction of a relevant electoral system, the setting of political and administrative structures, the introduction of an equitable system of fiscal devolution and the changes required to policies and practices of human resources management. The publication also deals with issues related to the introduction of the reform agenda – both in the immediate and long term – and highlights the steps to be taken to cope with the inevitable obstacles to the introduction of reforms.

The paper contains:

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Sri Lanka National Health Accounts 2000 - 2002
IPS Research Team
Health Economic Policy Series

This report presents the Sri Lanka National Health Accounts (SLNHA) preliminary estimates for the period of 2000-2002. Estimates throughout this report are derived from the Data Base of the IPS Health Policy Programme.

The estimates cover total national health expenditures, disaggregated by basic areas of expenditure by source, functions, and by provider. It also provides estimates of expenditure at the Central and Provincial level by source and by functions. The report concludes with comparative health expenditures of selected countries, for which data exist.

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Decentralization and fiscal devolution have assumed importance in Sri Lanka particularly in the context of the ongoing ethnic crisis, but the Provincial Council system which arose from the Thirteenth Amendment to the Constitution has several inherent weaknesses and deficiencies.

This paper analyses the fiscal and financial issues pertaining to the Provincial administrative system including the relative insignificance and inadequacy of the revenue sources devolved to the Provinces, provincial revenue buoyancy, the wide disparity between the different provincial administrations, the nature of provincial expenditure and the weaknesses of the prevailing grants system on which the Provincial Councils depend for their existence and functioning.

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The ‘State of the Economy 2005' report offers an analysis of key indicators of Sri Lanka's macroeconomic performance as well as developments in the global economy. In the backdrop of the massive human and asset losses resulting from the tsunami of December 26 2004 , a slowdown in the pace of reforms and a ballooning oil import bill, Sri Lanka is expected to see a growth rate in the range of 5-5.5 per cent in 2005. The report notes that a weakening of the macroeconomic environment – manifested in a persistent build up of inflationary pressure from mid-2004 – will require that appropriate policies be adopted to confront and resolve growing structural imbalances if the country is to ensure an effective post-tsunami recovery.

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The quota system that was the basis of the Multi-Fibre Arrangement (MFA), and which governed trade in textile and clothing (T&C) for the last four decades came to an end on 31 December 2004. The MFA artificially repressed the exports of competitive larger countries that had the capacity to supply T&C in large quantities like India and Pakistan in South Asia. At the same time, by providing a guaranteed market access, the MFA assisted several smaller countries in South Asia like Sri Lanka, Bangladesh, and Nepal to build up their export-oriented T&C sectors. The T&C sector gradually occupied a key position in these economies accounting for large foreign exchange earnings and generating a large number of jobs.

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Regulations – broadly understood in the sense of laws, regulations, orders and rules of all levels of government – have a key role to play in promoting economic growth and development. They are tools of addressing market failures, as well as equity failures, when economic growth fails to trickle down to the poor.

However, even as this country has moved along the path of economic reforms, priority has not been given to implementing a well-structured, “independent” regulatory mechanism in the country. Regulations have often been implemented that had unintended adverse impacts, did not realize the anticipated benefits, or that became unnecessarily burdensome.

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Impact of Trade Liberalization on Poverty and Household Welfare in Sri Lanka
by Sanath Jayanetti and Ganga Tilakaratna
Poverty and Social Welfare Series No. 6

This research study compiles Input-Output tables for Sri Lanka using the year 2000 as the base year.

This publication contains:

• The Input-Output table of the Sri Lankan economy for the year 2000 at producer prices accompanying with CD-ROM
• The inverse of the basic Input-Output Table
• A separate import matrix
• A detailed procedure of compilation of Input-Output tables
• Reconciliation of Input-Output tables with the Sri Lankan National Accounts
• A "snap-shot" of the Sri Lankan economy in 2000

The publication will assist policy analysts:

• To identify the main features of the economic structure of Sri Lanka
• To develop simple Input-Output models or "impact models"
• To undertake policy analyses of production, structure of demand, and exports, etc.
• To develop economy-wide computable general equilibrium models

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Sri Lanka 's National Accounts 1950 – 2002
by Terrence Savundranayagam
Macroeconomic Policy Series No. 15, May 2005

This study fills a vacuum in the available estimates of National Accounts by presenting a long term comparable series of Gross National Product and Gross National Expenditure measured at both current and constant prices. In addition, it presents for the first time, long term estimates of important components of the National Accounts such as Capital Formation, Consumption and Savings, while setting out and evaluating the sources and methods used in the estimates.

This publication highlights the policy challenges, particularly the economic challenges and opportunities presented by the devastating tsunami of 26 December 2004.   It reviews the relief phase, the need for equitable and pro-poor growth in tsunami affected areas, the importance of an accountable system to drive the reconstruction process, strengthening the monetary and fiscal position after the tsunami and introducing scientific and cost effective disaster prevention.  The publication highlights the importance of placing the tsunami in the broader debate over policy choices, of ensuring an equitable process to allocate funds, of ways to actively involve affected people in the reconstruction,

while not forgetting the needs of other poor groups such as conflict refugees. For the key issue of housing, it recommends greater dialogue by the authorities with beneficiaries over house design, land selection and criteria to allocate land.

The book is available for sale from the Institute premises and through leading book shops. It also could be downloaded free of charge here.

Note: Up-to-date analysis of Tsunami is covered in the Sri Lanka State of the Economy 2005 Report

The identification of the poor and the definition of poverty is rather complex since poverty dimensions are multifaceted. Poverty is not just an inadequacy of income to meet basic needs or the inability to spend. It is largely associated with numerous demographic, socio-economic, cultural, environmental, health and psychological factors. The aim of this study is therefore to compute a composite indicator of multidimensional poverty and regional poverty lines to identify the severity of poverty and regional disparities of poverty in terms of the characteristics of and the availability of resources to the poor. The study was based on the two data sets derived from the Consumer Finance and Socio Economic Survey (CFS) in 1996/97 and the Sri Lanka Integrated Survey (SLIS) in 1999/2000.

The main objectives of the study are:

• Identification of the poor by using a broader definition of poverty, which will take into account a number of indices in defining a poverty line. (Defining such a broad based poverty line requires a closer examination of characteristics and availability of resources to the poor).
• Measurement of regional differences on poverty using the poverty indices and constructed poverty lines.
• Development of a Composite Indicator of Multidimensional Poverty to identify poverty by severity and also to examine regional disparities of poverty.

Poverty reduction remains one of the frequently articulated public policy objectives in Sri Lanka. However, the achievements so far made in regard to poverty reduction have been sub-optimal in relation to expectations that have been aroused amongst the poor and the public resources that have been invested in the effort.

The study shows that the failure to achieve the expected outcomes from the series of exercises in relation to poverty reduction is the result of a number of governance-related issues. They are:

• The degree to which the objective of poverty reduction influences the direction and content of public policy;
• The accountability and transparency networks that relate to the formulation and implementation of policies, strategies, and interventions that have a bearing on poverty reduction;
• The degree and level of involvement of the poor as active partners in the formulation and implementation of public policies, etc., that have a bearing on poverty reduction; and
• The institutional underpinning as well as the process support that is required, in the Sri Lankan context, for effective attempts at poverty reduction.

Liberalization of International Air Transport in Sri Lanka: Policy Options
By Janaka Wijayasiri, Prashan Malalasekara, Priyanga Dunusinghe
International Economics Series, July 2004

The report provides a comprehensive and an analytical overview of the country’s economy.

The main focus of the report 2004 is on the Land Policy in Sri Lanka.

The report is available for purchase from the Publications Unit of the IPS and leading book stores, island wide.

It is a collection of essays on Sri Lankan economic policy issues and debates with contributions from specialists in the field, and published by Sage, New Delhi, India.

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More details: link to Sage, India

Saumya Kanthi Mitra comments on the IPS publication: “Economic Policy in Sri Lanka: Issues & Debates – A Festschrift in Honour of Gamani Corea” edited by Saman Kelegama, to the Economic Times of India.

The comments can be viewed at the Economic Times of India web site and at the "IPS in the Media" Section.

More comments on the book can be viewed at:

• Hindustan Times web site, 31 January 2005 and at the IPS in the Media Section (comments by Meenakshi Iyer)
• IPS in the Media Section (comment in Business World)
• Hindustan Times, and the IPS in the Media Section (comments in the Hindustan Times)
• Sunday Island, 1 May, 2005 and at the IPS in the Media Section ( comments by Sunil Chandrasiri)

Book Launch: “Ready-Made Garment Industry in Sri Lanka: Facing the Global Challenge”,
4 August, 2004

A book on “Ready-Made Garment Industry in Sri Lanka: Facing the Global Challenge” edited by Dr. Saman Kelegama, Executive Director of the Institute of Policy Studies will be launched on 4 August, 2004 in Colombo. Hon. Dr. Sarath Amunugama, Minister of Finance will attend the launch as the Chief Guest.

The book is published by the IPS and available for sale from the Institute premises and through leading book shops subsequent to the launch

The Sri Lanka garment industry has experienced phenomenal growth during the past twenty-five years and has emerged as a major sector of the economy in terms of its contribution to industrial production, foreign exchange earnings and employment generation. While the industry has been subject to much discussion and debate, there has not been any comprehensive publication regarding vital aspects of the industry. At a time when the garment industry is undergoing changes to face a challenging global environment particularly with the dismantling of the quota regime, this book highlights the key areas of the industry and fills the existing void in the literature.

The book consists of a selection of essays written in recent years by eminent specialists in the field. Supported by extensive statistical data, the book includes research papers that cover vital areas of policy issues and concerns in the context of the Sri Lanka garment industry such as productivity, forward and backward linkages, the effects of new WTO Agreements, the emerging challenges of the global environment and possible impacts on the Sri Lankan garment industry.

The material in this book will be of vital interest and importance not only to policy makers and the government but also to academics as well as to those actively engaged and working in the industry.

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Download Sample Chapter ( PDF format 94.5 kb )

Through an economic and regulatory analysis of the pharmaceuticals, cement and shipping sectors, this report has assessed the implications of cross-border competition on the functioning of these sectors in Sri Lanka. The core objective of this broad assessment was to obtain specific insights into the capacity of the Competition Authority and necessity of consumer interest organizations to deal with the anti-competitive practices that have pervaded these sectors.

The Report on the CEPA was prepared by a Joint Study Group (JSG) set up to explore ways and means of deepening and widening economic cooperation between India and Sri Lanka through a Comprehensive Economic Partnership.

The Report puts forward strategies and proposals for the successful implementation of the CEPA, and attempts to provide a blueprint for the deepening of economic integration, which has been initiated through the India-Sri Lanka Free Trade Agreement (ISLFTA).

The Report was prepared by the JSG co-chaired by India’s Dr. Rakesh Mohan and Sri Lanka’s Mr. Ken Balendra. Dr. Saman Kelegama, Executive Director, IPS, played a key role in the formulation of the report as a member of the JSG.

Click below to download the Joint Study Group Report on India-Sri Lanka Comprehensive Economic Partnership Agreement in PDF or ZIP format.

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Assessment of the Employees’ Provident Fund in Sri Lanka,
Ravi P Rannan-Eliya
and
Vindya Eriyagama
(2003)

The Reports on “Assessment of the Employees’ Provident Fund in Sri Lanka”; “Farmers’ and Fishermen’s Pension and Social Security Benefit Scheme in Sri Lanka”; and “Pension and Social Security Benefit Scheme for the Self-Employed Persons in Sri Lanka” present the findings of an evaluation of the operation and performance of the said social security systems in Sri Lanka.