Sri Lanka’s development policies are being reoriented under the stewardship of the United People’s Freedom Alliance (UPFA) Government, aimed at acceleration of economic growth with special consideration given to pro-poor growth strategies. The development strategy consolidates positive elements of the policies followed over the past two decades and revisits the weaknesses, limitations and lapses in past policies in order to ensure equitable development in the country.
As stated in the Economic Policy Framework, 2004 -Creating our Future, Building our Nation 2004 - and further articulated in the budget 2005, the new development strategy is premised on pro-poor pro-growth income improvement and redistribution policies with complementary participation of a socially responsible private sector and a strong public sector.1/ Higher economic growth alone is not sufficient to reduce poverty; instead it should focus on pro-poor growth strategies. A sustainable 6-8 per cent growth in real income is targeted over the next five years. This in turn requires raising investment to around 35 per cent of Gross Domestic Product (GDP). Such investments include domestic and foreign investment as well as public investment. The ultimate objective is to ensure that Sri Lanka steadily progresses towards an upper middle-income country status within the next ten years. The National Poverty Reduction and Growth Strategy (NPRGS) of the Government is the major policy approach to navigate pro-poor pro-growth, income and redistribution strategies. The main objectives of the NPRGS are to facilitate poor groups to engage in productive economic activities while giving them income support during the transition period, reduce the poverty gap between different social strata, minimize regional variations in the incidence of poverty and to narrow regional disparities in development. In the process of the implementation of these policy interventions and their translation into development strategies, poor and other vulnerable groups need to be made active partners in the mainstream development process. Mobilization of poor people through capacity building by formal and informal organizations, improvement and re-orientation of public sector delivery mechanisms, effective targeting of public assistance programmes and expanding employment and income opportunities are the major strategies which are being implemented for different categories of the poor. These approaches are expected to promote the participation of the poor in development projects and thereby empower them economically. Economic development can promote peace. The conflict in the North and the East has taken a heavy toll on the resources of the country and has also weakened investor confidence. Therefore, promotion of a regionally balanced economic growth becomes necessary to secure peace and prosperity. As part of the regional development strategy of the Government, a substantial investment on infrastructure development in the North and the East will be reflected in the national growth strategy to promote lasting peace through economic progress and equal opportunities.
Sri Lanka’s recent history attests to the economy’s resilience to adverse shocks. In the 1990s economic growth averaged 5.2 per cent despite a 20 year long conflict in the North and East. In 2004, despite the impact of adverse exogenous shocks, including the oil price hike and a drought, the economy sustained this pace, registering a 5.4 per cent growth and reached a per capita income level of US $ 1,030. However, Sri Lanka’s growth pattern has not been adequate for significantly reducing poverty in the rural and the plantation economy.
Sri Lanka’s social indicators, such as life expectancy, literacy and mortality rates, are well above those in comparable developing countries and are on par with many developed countries. In terms of the 1/ The Economic Policy Framework of the Government of Sri Lanka,...