Sri Lankan Foreign Assistance

Sri Lanka is highly dependent on foreign Assistance and several high-profile assistance projects were launched in 2003. The most significant of these resulted from an aid conference in Tokyo in June 2003; pledges at the summit, which included representatives from the International Monetary Fund, World Bank, Asian Development Bank, Japan, the European Union and the United States totaled $4.5 billion.

Sri Lankan Credit Rating and Commercial Borrowing

Sri Lanka had applied for credit ratings from international agencies in its efforts to apply for loans from international markets in 2005 after the election of Mahinda Rajapakse as president. Standard and Poor's has rated Sri Lanka a "B+" speculative rating, four grades below investment grade. Fitch has rated Sri Lanka with "BB-" which is three grades below investment grade. Standard and Poor's maintains Sri Lanka is constrained by providing widespread subsidies, a bloated public sector, transfers to loss-making state enterprises, and high interest local and international burdens. Standard and Poor's estimates public sector debt has reached 95 % of GDP, in comparison to CIA estimates of 89 % of GDP [9]. Sri Lanka in mid-2007 sought to borrow $500 million from international markets to shore up the deteriorating exchange rate and reduce pressure on repayment of the domestic debt market. The head of the opposition UNP, Ranil Wickremasinghe has warned that such intense borrowing is unsustainable and will not repay these loans once elected to power.

Sri Lankan Global economic relations

Exports to the United States, Sri Lanka's most important market, were valued at $1.8 billion in 2002, or 38% of total exports. For many years, the United States has been Sri Lanka's biggest market for garments, taking more than 63% of the country's total garment exports. India is Sri Lanka's largest supplier, with exports of $835 million in 2002. Japan, traditionally Sri Lanka's largest supplier, was its fourth-largest in 2002 with exports of $355 million. Other leading suppliers include Hong Kong, Singapore, Taiwan, and South Korea. The United States is the 10th-largest supplier to Sri Lanka; U.S. exports amounted to $218 million in 2002, according to Central Bank trade data-U.S. Customs data places U.S. exports to Sri Lanka at $166 million in 2002. Wheat accounted for 14% of U.S. exports to Sri Lanka in 2002, down from the previous year. A brand new port is being built in Hambantota in South Sri Lanka by the Chinese government as a part of the massive Chinese aid to Sri Lanka. This will ease the congestion in Sri Lankan ports, particularly in Colombo. In 2009, 4456 ships visited Sri Lankan ports.

Sri Lankan Agriculture

The agricultural sector of the country which producing domestic consumption such as rice, coconut and grain also a part of the culture since 2500 years. The tea industry which existing since 1867 is not a part of this sector of agriculture, it is mainly focusing on export market rather than domestic use in the country.Ganja or cannabis is mostly grown for the needs of Ayurveda, the indigenous medicine of Sri Lanka.

Sri Lankan Apparel and textile industry

The apparel industry of the country which producing high quality ready made garments and the main exporters are USA and Europe. There are about 900 factories throughout country serves world's leading fashion designing companies like Victoria's Secret, Liz Claiborne and Tommy Hilfiger.

Sri Lankan Tea industry

The tea industry (operating under the Ministry of Public Estate Management and Development) is one of the main foreign exchange gaining industry in Sri Lanka also became the world's leading exporter in 1995 shared 23% of the total export higher than Kenya shared 22%. The central highlands of the country, low temperature climate throughout the year, annual rainfall and the level of humidity are more favorable geographical factors for production in high quality tea. The industry was introduced to the country in 1867 by James Taylor, the British planter who arrived in 1852. Recently, Sri Lanka has become one of the countries exporting fair trade tea to the UK and other countries. It is reckoned that such projects could reduce rural poverty^.

Sri Lankan Tourism

Unawatuna Beach is one of the finest tourist destinations in southern coast.Tourism is one of the main industries in Sri Lanka. Major tourist attractions are focused around the islands famous beaches located in the southern and eastern (e.g. Pasi Kuda) parts of the country, ancient heritage sites located in the interior of the country and lush green resorts located in the mountainous regions of the country. Also the precious stones such as rubies and sapphires frequently found in Ratnapura and its surrounding areas also a major tourist attraction in the country. The visiting tourists in areas where precious stones are available can visit Adam's Peak, Sinharaja Forest Reserve, Udawalawe National Park and Kitulgala (place of "The Bridge on the River Kwai" was filmed) as well.

The 2004 Indian Ocean Tsunami and the past civil war have reduced the tourist arrivals, however the International media reports published about the improvements in industry of January 2008 by 0.6%, March 2008 by 8.6%when comparing to last year's (2007) figures.

Sri Lankan Energy

The energy policy is governed by the Ministry of Power and Energy, while the production and retailing of electricity is carried out by the Ceylon Electricity Board. Energy in the country is mostly generated by hydro power stations in Central Province. The Sri Lankan Government (GOSL) and many individual "green groups" in Sri Lanka have been focusing on eco-friendly solutions to energy development and the country is undergoing changes to enforce stricter environmental policies in industries, both public and private.

Sri Lankan Transportation and roads

Most Sri Lankan cities and towns are connected by the Sri Lanka Railways, the state-run national railway operator. The Ceylon Transport Board is the state-run agency responsible for operating public bus services across the island. The trains in Sri Lanka are very well maintained and both the National Railway and CTB employ highly qualified and experienced local engineers. Rail accidents have been minimal in Sri Lanka compared to most developing nations and train travel is rather punctual and schedules are usually well followed.
The total length of Sri Lankan roads exceeds 11,000 kilo meters (6,840 mi), with a vast majority of them being paved. The government has launched several highway projects to bolster the economy and national transport system, including the Colombo-Katunayake Expressway, the Colombo-Kandy (Kadugannawa) Expressway, the Colombo-Padeniya Expressway and the

Outer Circular Highway

to ease Colombo's traffic congestion. The government sponsored "Road Development Authority" or RDA has been involved in several large-scale projects all over the island in attempt to revolutionize the road network in Sri Lanka. The highway system is just like any highway system in any developed country with clear signage, proper paving, parking spaces, bus stops, bicycle lanes, lane indicators, luminous lighting, traffic lights and pedestrian crossings. Sri Lanka's commercial and economic centers, primarily the capitals of the nine provinces are connected by the "A-Grade" roads which are categorically organized and marked. Furthermore, "B-Grade" roads, also paved and well maintained, marked etc. connect district capitals within provinces.

Sri Lankan Financial institutions

The Central Bank of Sri Lanka is the monetary authority of Sri Lanka and was established in 1950. The Central Bank is responsible for the conduct of monetary policy in the country and also has the supervisory powers over the financial system.^[8] The current chairman of the Central Bank is Ajith Nivard Cabraal.
The Colombo Stock Exchange (CSE) is the main stock exchange in Sri Lanka. It is one of the most modern exchanges in South Asia, providing a fully automated trading platform. The vision of the CSE is to contribute to the wealth of the nation by creating value through securities. The headquarters of the CSE have been located at the World Trade Center Towers  in Colombo since 1995 and it also has branches across the country in Kandy, Matara, Kurunegala, Negombo and Jaffna.^[9] In 2009, after the 30 years long civil war came to an end, the CSE was the best performing stock exchange in the world.

Sri Lankan Macro-economic trend

 

 

 

 

 

 

This is a chart of trend of gross domestic product of Sri Lanka at market prices by the International Monetary Fund with figures in millions of Sri Lankan Rupees.

Year	Gross Domestic Product	US Dollar Exchange
1980	66,167	16.53 Sri Lankan Rupees
1985	162,375	27.20 Sri Lankan Rupees
1990	321,784	40.06 Sri Lankan Rupees
1995	667,772	51.25 Sri Lankan Rupees
2000	1,257,637	77.00 Sri Lankan Rupees
2005	2,363,669	100.52 Sri Lankan Rupees

For purchasing power parity comparisons, the US Dollar is exchanged at 113.4 Sri Lankan Rupees only.

In 1977, Colombo abandoned statistic economic policies and its import substitution trade policy for market-oriented policies and export-oriented trade. Sri Lanka's most dynamic industries are food processing at the moment. Also secondly textiles & apparel, food & beverages, telecommunications, insurance & banking. 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 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 non plantation agriculture, dismantle the government's monopoly on wheat imports, and promote more competition in the financial sector. A continuing cloud over the economy is the fighting between the Government of Sri Lanka and the LTTE, which has cost 65,000 lives in the past 15 years. Government provides employment for 13% of the work force and follows state enterprise oriented policies. Privatization of such enterprises has stopped and reversed, with several new state enterprises launched.

Sri Lankan Labor

More than 20% of the 6.1 million-strong labor force, excluding the north and east, is unionized. Trade union membership is on the decline. There are more than 1,650 registered trade unions, many of which have 50 or fewer members, and 19 federations. Many unions have political affiliations. The Ceylon Workers Congress (CWC) and Lanka Jathika estate workers union are the two largest unions representing workers in the heavily unionized plantation sector. The president of the CWC also is Minister of Livestock Development and Estate Infrastructure. The CWC's agenda includes political issues. Some of the stronger and more influential trade unions include the Ceylon Mercantile Union, Sri Lanka Nidhahas Sevaka Sangamaya, Jathika Sevaka Sangayama, Ceylon Federation of Trade Unions, Ceylon Bank Employees Union, Union of Post and Telecommunication Officers, Conference of Public Sector Independent Trade Unions, and the JVP-aligned Inter-Company Trade Union. The unemployment rate has declined in recent years and hovers at 10%. The rate of unemployment among high school and college graduates, however, remains proportionally higher than the rate for less-educated workers. The government has embarked on educational reforms it hopes will lead to better preparation of students and fewer mismatches between graduates and jobs. In addition, it also has begun a youth corps program to provide employment skills to the unemployed.

Sri Lankan Economic history

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. Twenty five years of civil war has no doubt slowed economic growth , diversification and liberalization, and the political group Janatha Vimukthi Peramuna (JVP) uprisings, especially the second in the late 1980s, also caused extensive upheavals.The Mahinda Rajapakse government stopped the privatization process and indeed launched sveral new ones (Mihin Air). Still, Sri Lanka, retains her vaunted high human development index with widespread and near total literacy rate (90.1%), result of universal education policies, widespread health delivery, low infant mortality (one of the lowest in the region). It has 555 government funded hospitals.

Following the quelling of the JVP, increased privatization, reform, and a stress on export-oriented growth helped revive the economy's performance, taking GDP growth to 7% in 1993. 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 affected by terrorist attacks in Sri Lanka and the United States. The crises exposed the fundamental policy failures and structural imbalances in the economy and the need for bold reforms. The year ended in parliamentary elections in December, which saw the election of a more pro-capitalism party to Parliament (while the socialist leaning Sri Lanka Freedom Party retained the Presidency).

The government of Prime Minister Ranil Wickremasinghe of the United National Party has indicated a strong commitment to economic and social sector reforms, deregulation, and private sector development. In 2002, Sri Lanka commenced a gradual recovery. Early signs of a peace dividend were visible throughout the economy. Sri Lanka has been able to reduce defense expenditures and begin to focus on getting its large, public sector debt under control. In addition, the economy has benefited from lower interest rates, a recovery in domestic demand, increased tourist arrivals, a revival of the stock exchange, and increased foreign direct investment (FDI). In 2002, economic growth bounced up to 4%, helped by strong service sector growth. Agriculture staged a partial recovery. At present Agriculture in Sri Lanka needs keen attention as it directed towards disastrous situation. Industrial sector growth, however, faltered for the second consecutive year due to weak demand and lower prices for Sri Lanka's exports. The government was able to exert fiscal control, and inflation trended down. Total FDI inflows during 2002 were about $246 million and are expected to exceed $300 million in 2003. The largest share of FDI has been in the services sector. Good progress was made under the Stand By Arrangement, which was resumed by the International Monetary Fund (IMF). These measures, together with peaceful conditions in the country, have helped restore investor confidence and created conditions for the government to embark on extensive economic and fiscal reforms and seek donor support for a poverty reduction and growth strategy. However, the resumption of the civil-war in 2005 led to a step increase defense expenditures. The increased violence and lawlessness also prompted some donor countries to cut back on aid to the country. Sri Lanka has also accumulated a 9.2 % deficit and the central bank has not intervened since late 2006 to print more currency . A sharp rise in world petroleum prices combined with fallout from the civil war has led to inflation hitting 20%.

Sri Lankan Economy

With an economy of $43.323 billion (2010 estimate)($106.87 billion PPP estimate),and a per capita GDP of about $5,300 (PPP), Sri Lanka has mostly had strong growth rates in recent years. It is far ahead of its other core south Asian peers such as Bangladesh, India and Pakistan.

The main economic sectors of the country are tourism, tea export, apparel, textile, rice production and other agricultural products. In addition to these economic sectors, overseas employment contributes highly in foreign exchange, most of them from the middle-east.

Since becoming independent from Britain in February 1948, the economy of the country has been affected by natural disasters such as the 2004 Indian Ocean earthquake and a number of insurrections, such as the 1971, the 1987-89 and the 1983-2009 civil war. The parties which ruled the country after 1948 did not implement any national plan or policy on the economy, veering between left and right wing economic practices. The government during 1970-77 period applied pro-left economic policies and practices. Between 1977 and 1994 the country came under UNP rule and between 1994 and 2004 under SLFP rule. Both of these parties applied pro-right policies. 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 mass production of goods for domestic consumption such as rice, grain and other agricultural products.

An informal Economy

An informal economy is economic activity that is neither taxed nor monitored by a government, contrasted with a formal economy. The informal economy is thus not included in that government's Gross National Product (GNP). Although the informal economy is often associated with developing countries, all economic systems contain an informal economy in some proportion.
Informal economic activity is a dynamic process which includes many aspects of economic and social theory including exchange, regulation, and enforcement. By its nature, it is necessarily difficult to observe study, define, and measure. No single source readily or authoritatively defines informal economy as a unit of study.
The terms "under the table" and "off the books" typically refer to this type of economy. The term black market refers to a specific subset of the informal economy. The term "informal sector" was used in many earlier studies, and has been mostly replaced in more recent studies which use the newer term.

Micro economics are focused on an individual person in a given economic society and Macro economics is looking at an economy as a whole. (Town, city, region)

GDP

The GDP - Gross domestic product of a country is a measure of the size of its economy. The most conventional economic analysis of a country relies heavily on economic indicators like the GDP and GDP per capita. While often useful, it should be noted that GDP only includes economic activity for which money is exchanged.

Economic measures

There are a number of ways to measure economic activity of a nation. These methods of measuring economic activity include:

• Consumer spending
• Exchange Rate
• Gross domestic product
• GDP per capita
• GNP
• Stock Market
• Interest Rate
• National Debt
• Rate of Inflation
• Unemployment

Balance of Trade

Economic sectors

The economy includes several sectors (also called industries), that evolved in successive phases.

• The ancient economy was mainly based on subsistence farming.

• The industrial revolution lessened the role of subsistence farming, converting it to more extensive and mono-cultural forms of agriculture in the last three centuries. The economic growth took place mostly in mining, construction and manufacturing industries.

• In the economies of modern consumer societies there is a growing part played by services, finance, and technology—the (knowledge economy).

In modern economies, there are four main sectors of economic activity:

• Primary sector of the economy: Involves the extraction and production of raw materials, such as corn, coal, wood and iron. (A coal miner and a fisherman would be workers in the primary sector.)
• Secondary sector of the economy: Involves the transformation of raw or intermediate materials into goods e.g. manufacturing steel into cars, or textiles into clothing. (A builder and a dressmaker would be workers in the secondary sector.)
• Tertiary sector of the economy: Involves the provision of services to consumers and businesses, such as baby-sitting, cinema and banking. (A shopkeeper and an accountant would be workers in the tertiary sector.)
• Quaternary sector of the economy: Involves the research and development needed to produce products from natural resources. (A logging company might research ways to use partially burnt wood to be processed so that the undamaged portions of it can be made into pulp for paper.) Note that education is sometimes included in this sector.

Other sectors include the

• Public Sector or state sector
• Private Sector or privately-run businesses

Social sector or Voluntary sector

The industrial revolution

The first economist in the true meaning of the word was the Scotsman Adam Smith (1723–1790). He defined the elements of a national economy: products are offered at a natural price generated by the use of competition - supply and demand - and the division of labor. He maintained that the basic motive for free trade is human self interest. The so-called self interest hypothesis became the anthropological basis for economics. Thomas Malthus (1766–1834) transferred the idea of supply and demand to the problem of overpopulation. The United States of America became the place where millions of expatriates from all European countries were searching for free economic evolvement.
The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, and transport had a profound effect on the socioeconomic and cultural conditions starting in the United Kingdom, then subsequently spreading throughout Europe, North America, and eventually the world. The onset of the Industrial Revolution marked a major turning point in human history; almost every aspect of daily life was eventually influenced in some way. In Europe wild capitalism started to replace the system of mercantilism (today: protectionism) and led to economic growth. The period today is called industrial revolution because the system of Production, production and division of labor enabled the mass production of goods.

History

As long as someone has been making and distributing goods or services, there has been some sort of economy; economies grew larger as societies grew and became more complex. Summer developed a large scale economy based on commodity money, while the Babylonians and their neighboring city states later developed the earliest system of economics as we think of, in terms of rules/laws on debt, legal contracts and law codes relating to business practices, and private property.
The Babylonians and their city state neighbors developed forms of economics comparable to currently used civil society (law) concepts.^[3] They developed the first known codified legal and administrative systems, complete with courts, jails, and government records.
Several centuries after the invention of cuneiform, the use of writing expanded beyond debt/payment certificates and inventory lists to be applied for the first time, about 2600 BC, to messages and mail delivery, history, legend, mathematics, astronomical records and other pursuits. Ways to divide private property, when it is contended... amounts of interest on debt... rules as to property and monetary compensation concerning property damage or physical damage to a person... fines for 'wrong doing'... and compensation in money for various infractions of formalized law were standardized for the first time in history.

Etymology

The English words "economy" and "economics" can be traced back to the Greek words οἰκονόμος "one who manages a household" (derived from οἴκος "house", and νέμω "distribute (especially, manage)"), οἰκονομία "household management", and οἰκονομικός "of a household or family". The first recorded sense of the word "economy", found in a work possibly composed in 1440, is "the management of economic affairs", in this case, of a monastery. Economy is later recorded in more general senses including "thrift" and "administration". The most frequently used current sense, "the economic system of a country or an area", seems not to have developed until the 19th or 20th century.

Economy

An economy consists of the economic system of a country or other area, the labor, capital and land resources, and the economic agents that socially participate in the production, exchange, distribution, and consumption of goods and services of that area. A given economy is the end result of a process that involves its technological evolution, history and social organization, as well as its geography, natural resource endowment, and ecology, as main factors. These factors give context, content, and set the conditions and parameters in which an economy functions.
Today the range of fields of study examining the economy include social sciences such as economics, sociology (economic sociology), history (economic history), anthropology (economic anthropology) and geography (economic geography). Practical fields directly related to the human activities involving production, distribution, exchange, and consumption of goods and services as a whole, range from engineering to management and business administration to applied science to finance.
All kind of professions, occupations, economic agents or economic activities, contribute to the economy. Consumption, saving and investment are core variable components in the economy and determine market equilibrium. There are three main sectors of economic activity: primary, secondary and tertiary.