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Sri Lanka

 
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Sri Lanka

Development Planning

During the early years of independence, successive governments placed little emphasis on development planning, in part because the immediate economic problems appeared to be manageable. The National Planning Council was established in 1956 as part of the Ministry of Finance. Between 1957 and 1959, the council and the Central Bank of Sri Lanka invited a number of foreign economists to visit Sri Lanka and offer the government both their diagnoses of the country's economic problems and their prescriptions for the planning and implementation of recommended remedies. These studies provided many of the rationales for economic policies and planning in the 1960s.

In 1959 the National Planning Council issued a Ten-Year Plan, the most ambitious analysis of the economy and projection of planning that had yet been officially published. This plan sought to increase the role of industry in the economy. Unfortunately, its forecasts were based on faulty projections of population and labor force growth rates. Moreover, attempts to implement it collided with the exchange and price crunch of 1961 and 1962, and the plan became increasingly out of touch with the changing economic situation.

A new Ministry of Planning and Economic Affairs (no longer in existence) was established in 1965. The ministry decided not to draft another single long-term plan involving a five- or ten-year period. Instead, it drew up a number of separate, detailed, well-integrated, five-year plans involving different ministries. The government targeted agriculture, especially wet rice, as the area in which growth could best be achieved.

The UNP government that came to power in 1970 shifted toward a more formal and comprehensive state direction of the economy. The Five-Year Plan for 1972-76 had two principal aspects. First, it sought to remove disparities in incomes and living standards. Second, the plan sought to promote economic growth and to reduce unemployment. It envisioned rapid growth in agriculture, not only in the traditional crops of wet rice, tea, rubber, and coconut, but in such minor crops as sunflower, manioc, cotton, cashew, pineapple, and cocoa. Like the Ten-Year Plan of 1959, this plan proved to be based on overly optimistic assumptions, and it soon ceased to exercise influence on the government's economic policy. In 1975 it was replaced by a Two-Year Plan that placed even greater emphasis on agricultural growth and less on industrial development.

After 1977 the government continued to accept the principle of state direction of economic activity, but in contrast to the 1970-77 period the government encouraged the private sector to participate in the economy. Its first Five-Year Plan (1978-83) included an ambitious public investment program to be financed largely by overseas grants and loans. Its immediate objective was to reduce unemployment, which had risen during the tenure of the previous government.

A series of five-year rolling investment plans was set in motion by the Ministry of Finance and Planning in the 1980s. The plan for the 1986-90 period envisaged investment of Rs268 billion (for value of the rupee--see Glossary) with the emphasis on infrastructure projects such as roads, irrigation, ports, airports, telecommunications, and plantations. Of this total, 50 percent was to be spent by the state sector. Foreign sources were to supply Rs69 billion. The target annual average growth for the gross domestic product (GDP--see Glossary) was 4.5 percent, a decrease from the 5.2 percent envisaged by the plan for the 1985-89 period and the 6 percent actually achieved between 1977 and 1984.

Data as of October 1988


Sri Lanka - TABLE OF CONTENTS

Sri Lanka -

Chapter 3. The Economy


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