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Economic Policy Shifts in Sri Lanka: The Post-Conflict Development Challenge

Author

Listed:
  • Yiping Huang

    (China Center for Macroeconomic Research Peking University and Barclays)

  • Jian Chang

    (Barclays Capital Asia Limited)

  • Prema-Chandra Athukorala

    (Arndt-Corden Department of Economics, College of Asia and the Pacific, Australian National University)

  • Sisira Jayasuriya

    (Department of Economics, Monash University, Melbourne, Australia)

Abstract

The end of the long civil war in Sri Lanka in 2009 generated widespread expectations of a peace dividend that would enable the country to embark on a period of sustained economic growth. Recent developments have dampened that optimism, however, rekindling fears that Sri Lanka's tale of missed opportunities may continue. After showing remarkable resilience during decades of war and conflict, the Sri Lankan economy has failed to capitalize on the window of opportunity presented by the end of the military conflict. In the aftermath of military victory, there has been a sharp reversal of trade liberalization and a marked shift back towards nationalist-populist state-centered economic policies, reflecting the pressures of resurgent nationalism, an unprecedented concentration of political power in a small ruling group, and the influence of some powerful vested interests. Unfortunately, a return to the failed past policies of inward-oriented development strategies offers no viable solutions for the problems confronting small, capital- and resource-poor countries in today's globalized world. Sri Lanka must change both its political practices and economic policies drastically and urgently to cope with the huge development challenges facing it in an environment of global economic turbulence. © 2013 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Yiping Huang & Jian Chang & Prema-Chandra Athukorala & Sisira Jayasuriya, 2013. "Economic Policy Shifts in Sri Lanka: The Post-Conflict Development Challenge," Asian Economic Papers, MIT Press, vol. 12(2), pages 1-28, Summer.
    • Handle: RePEc:tpr:asiaec:v:12:y:2013:i:2:p:1-28
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    Cited by:

    1. Gerda Asmus-Bluhm & Vera Z. Eichenauer & Andreas Fuchs & Bradley Parks, 2025. "Does India Use Development Finance to Compete With China? A Subnational Analysis," Journal of Conflict Resolution, Peace Science Society (International), vol. 69(2-3), pages 406-433, March.
    2. Prema-chandra Athukorala & Sisira Jayasuriya, 2015. "Victory in War and Defeat in Peace: Politics and Economics of Post-Conflict Sri Lanka," Asian Economic Papers, MIT Press, vol. 14(3), pages 22-54, Fall.
    3. Sriananthakumar, Sivagowry & Narayan, Seema, 2015. "Are prolonged conflict and tension deterrents for stock market integration? The case of Sri Lanka," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 504-520.

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    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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