Sri Lanka has continued to experience strong economic growth following the end of the civil war. The government has constantly pursued large-scale reconstruction and development projects in order to spur growth in disadvantaged areas, and has also tried to develop small and medium enterprises as well as agricultural productivity.
The country’s bloated civil service and high debt payments have historically contributed to high budget deficits. However, fiscal consolidation and strong GDP within the last few years have helped to bring down the deficit.
Low tax revenues remain a concern for the country. The global financial crisis and recession nearly caused a balance of payments crisis. At the same time, agriculture slowed due to a drought, and global demand for payment affected both exports and trade. In early 2012, the government chose to float the Rupee, resulting in sharp depreciation. Strong remittances from Sri Lankan workers abroad help to offset the trade deficit.
Composition of GDP: