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Economy

Sri Lanka has experienced modest economic growth since independence in 1948. The economy relied on agricultural exports until the 1980s, when export-oriented manufacturing grew in importance. The civil war in Sri Lanka has discouraged foreign investment and constrained economic progress since the early 1980s.

The gross domestic product (GDP), the total value of all goods and services produced, has grown at an annual rate of about 3 percent since 1948. The relatively slow growth of the population helped create a greater per capita gain despite the modest growth of the economy. In 2001 annual per capita income was $850.

In 1977 the government of Sri Lanka launched an economic liberalization program designed to boost the manufacturing sector. The program established special economic zones that attracted foreign investment and promoted export-oriented manufacturing. The program increased exports of manufactured goods such as garments and electronics, while also providing a new source of employment.

In terms of GDP and export earnings, the significance of agriculture relative to manufactured goods declined substantially after 1977. The contribution of agriculture to the country’s GDP declined from 40 percent in 1977 to 19.5 percent in 2001. The contribution of manufacturing rose from 12 percent in 1977 to 16 percent in the late 1980s, where it remained through the 1990s; in 2001 it stood at 15.8 percent. In 1999 manufactured goods generated about 75 percent of export earnings, while food product exports generated about 21 percent.

Foreign Trade

In 2001 the United States was the largest purchaser of Sri Lanka’s exports, accounting for approximately 64 percent of the total value, while the European Union (EU) accounted for about 30 percent. Manufactured goods made up 75 percent of Sri Lanka’s total exports in 1999. When the government of Sri Lanka began to promote export-oriented manufacturing in 1977, manufactured products accounted for only 14 percent of total exports. Textiles and garments became the most significant single category of exports by 1986.

Asian countries are the main exporter of goods to Sri Lanka. Together they provide about 55 percent of Sri Lanka’s total imports. The largest volume of imports comes from India. The principal imports are rice, wheat, sugar, petroleum, and fertilizer.

Currency and Banking

The monetary unit in Sri Lanka is the rupee, which consists of 100 cents (89.4 rupees equal U.S.$1; 2001 average). The Central Bank of Sri Lanka, the sole bank of issue, also acts as a financial adviser to the government and administers monetary policy. The two state-owned banks, Bank of Ceylon and People’s Bank, dominate the banking system.

Government

Sri Lanka is a sovereign nation within the Commonwealth of Nations. Upon gaining independence from Britain in 1948, Sri Lanka (then known as Ceylon) became a dominion within the British Commonwealth of Nations, a loose alliance of mostly former British colonies. The head of state was formally the British monarch, represented by a governor general.

In 1972 the country adopted a new constitution that formally changed its name from Ceylon to Sri Lanka and established it as a republic. An appointed president replaced the British monarch as head of state. In 1978 Sri Lanka ratified a new constitution that established the popular election of the president.

For all its years as an independent country, Sri Lanka has had an active multiparty system, democratically elected governments, and peaceful transfers of power. Universal adult suffrage has been in place since 1931. The minimum voting age is 18.

Executive

The president of Sri Lanka is head of state, chief executive, and commander in chief of the armed forces. The president is directly elected to a six-year term and may serve no more than two terms. The president appoints the prime minister and the cabinet of ministers, all of whom must be members of the legislature.

The president has wide-ranging powers. She or he can dismiss the prime minister or any other minister, dissolve Parliament and call for new parliamentary elections, suspend the sitting of Parliament for a limited period of time, and submit to a national referendum any bill that Parliament has rejected.

Legislature

The legislature of Sri Lanka is a unicameral (single-chamber) body called Parliament. It has 225 members; 196 members are directly elected and 29 are appointed from national party lists that are compiled according to which parties won at least 5 percent of the vote. Members serve six-year terms. No term limits are imposed. Members are elected under a modified system of proportional representation. The prime minister is traditionally the leader of the political party that obtains a majority of seats in Parliament. If no party gains a majority, a member of Parliament who obtains the support of a majority of members may be appointed prime minister.

Judiciary

The judicial system of Sri Lanka includes a Supreme Court, Court of Appeal, High Court, magistrates courts, and primary courts. The Supreme Court is the highest court. It is comprised of seven judges, including a chief justice. The president of the republic appoints the justices of the Supreme Court and the Court of Appeal. No term limits are imposed for the justices.

Under the 1978 constitution, oversight of the judiciary is provided by a three-member Judicial Commission, comprised of the chief justice of the Supreme Court and two other judges. The commission is responsible for reviewing judicial appointments (except those to the Supreme Court) and protecting the judiciary from political interference.

The laws of Sri Lanka reflect diverse cultural influences. Criminal laws are based primarily on British law. Civil laws are based on Roman-Dutch law. Marriage, divorce, and inheritance laws are communal, based on Tesavalami (Tamil law), Kandyan law (Sinhalese), and Islamic family law.

Local Government

For purposes of local government, the country of Sri Lanka is divided into nine provinces: Western Province, Central Province, Southern Province, Northern Province, Eastern Province, North-Western Province, North-Central Province, Uva Province, and Sabaragamuwa Province. The provinces are subdivided into a total of 25 districts.

In 1989 the 13th amendment to the constitution gave more power to the provinces. Provincial councils were established, and elections were held to elect provincial councils in all but the Northern and Eastern provinces, where the civil war continued to be centered. Members of the provincial councils are directly elected to serve five-year terms. The councils possess limited powers in education, health, rural development, social services, agriculture, security, and local taxation. Each province is headed by a governor, who is appointed by the president.

Local government also includes district councils, municipal councils, urban councils, and village-level councils. All local governments have limited powers, and the president of the republic has the power to dissolve them at will.

Political Parties

The United National Party (UNP) and the Sri Lanka Freedom Party (SLFP) are the country’s two leading political parties. Both parties are democratic socialist in orientation. Since 1948 they have generally alternated in forming governments, often in coalition with other parties. Governing coalitions led by the SLFP have included the United Left Front (ULF), formed in 1968, and the People’s Alliance (PA), formed in 1994. After the 2001 legislative elections, the UNP formed the United National Front (UNF) coalition to gain control of the legislature. The SLFP held the presidency, however, creating a strong rivalry between the executive and the legislature.

Other prominent political parties in Sri Lanka include the Communist Party of Sri Lanka (CPSL); the Sri Lanka Muslim Congress; the Tamil United Liberation Front (TULF), long the foremost Tamil political party; the Janatha Vimukthi Peramuna (JVP; People’s Liberation Front), a Marxist party with a Sinhalese base of support; and Sihala Urumaya (SU; Legacy of Sinhalese), a Sinhalese Buddhist party. The People’s Front of the Liberation Tigers (PFLT) is the political arm of the Liberation Tigers of Tamil Eelam (LTTE), a militant separatist Tamil organization.

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