Resource information
This report provides an integrated view
of Sri Lanka's long term development challenges for
sustainable growth and poverty reduction. Sri Lanka's
substantial achievements in human development are well
known. In several dimensions - such as universal primary
enrollment, gender equality, infant and maternal mortality -
the country is well positioned to meet the Millennium
Development Goals (MDGs). In addition, housing conditions
have substantially improved, relative to the early 1980s, in
particular with respect to housing materials and access to
electricity, safe water and sanitation facilities. However,
despite improved overall access to basic services, large
disparities remain in the access to, and quality of most of
these services. Of particular concern is the fact that
poverty reduction has been slow, while income inequality has
risen in recent years. The disappointing trend in national
poverty incidence also reflects a long-term growth
performance significantly below the country's
potential. The core theme of this report is thus the
following: Sri Lanka must achieve a higher growth rate, but
do so in a manner that poor people, and the poor regions of
the country can more fully participate in this growth. The
report further analyzes early reforms and their impact, as
well as that of private sector participation. However,
despite the increased role of the private sector, little
progress was made in fundamentally redefining the role of
the state, partly owing to Sri Lanka's strong
attachment to a large public sector. An important message of
this report is that much of Sri Lanka's skewed growth
record and ensuing increased income inequality, spanning
through alternate governments, is a reflection of the
unfinished reform agenda. Recommendations suggest improved
public financial management, including public debt
reduction, and the rationalization of public spending,
linking it to the poverty reduction strategy. In addition,
the performance of state-owned enterprises should be
improved, followed by fiscal consolidation and adequate tax
policies. Policies for export growth should be accelerated,
pursuing a competitive real exchange rate, and avoiding
trade policy reversals, but it is also important to note
that preferential trade liberalization, i.e., access to
markets cannot substitute for needed improvements in labor
productivity, lead time, and cost effectiveness. The report
also focuses on the importance of the impacts from
agricultural development, infrastructure development, and
certainly the impacts of improved education and health.
