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Enabling poor rural people to overcome poverty in Sri LankaRural poverty in Sri Lanka

Despite the fact that the country has been engaged in a 26-year

conflict that ended only recently, Sri Lanka has made significant

economic and social progress over the past 30 years. Economic

growth has been rapid, and the estimated 2010 GDP growth rate

is over 9 per cent – among the top 10 in the world. Between 2006

and 2009, the poverty level fell by half to about 7 per cent. In the

past three decades, the country has made significant progress in

improving living conditions and access to basic services. However,

young people face an unemployment rate four times higher than

the population as a whole, according to 2010 estimates.

The great majority of the population lives in rural areas, though the country is

rapidly urbanizing. Almost a quarter of Sri Lankans live below the poverty line.

Four fifths of the country’s poor people live in the rural sector, and almost half of

the poor rural population consists of small-scale farmers. They are concentrated

in the Central, Uva, Sabaragamuwa and Southern provinces, where agricultural

growth has been sluggish, as well as in areas affected by the conflict.

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Agriculture is the most important sector of the Sri Lankan economy, and small-scale

farmers produce most of the country’s agricultural output. However, their production

systems are hampered by neglect, poor economies of scale, low investment levels

resulting from poor financial services and inappropriate or limited technology.

Other factors limiting poor farmers’ livelihoods include fragmented landholdings, high

post-harvest losses, inconsistent pricing and trade policies, and difficulties accessing

lucrative markets.

While its contribution has declined during the past three decades, agriculture

accounts for almost 15 per cent of gross domestic product and a quarter of total

exports. It is the most important source of employment, providing jobs for around

one third of the workforce.

As a developing island nation, Sri Lanka is particularly vulnerable to climate change.

The sea level is expected to rise by half a metre over the next two decades.

Climate-related impacts, already evident, include more frequent and more intense

floods and landslides, which cause extensive damage and loss to assets and

displacement of people, particularly poor people. With predictions of higher

temperatures and lower rainfall, output of paddy – which is dominated by small-scale

cultivation – is expected to fall up to 30 per cent over the next 20 to 30 years.

Rising sea levels could force communities to leave lower coastal areas of the north

and east, where the recent conflict was concentrated.

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Eradicating rural poverty in Sri LankaThe government is working to reduce poverty through a combination of state-directed

policies and promotion of private investment. The goal is to spur growth in

disadvantaged areas, develop small and medium-sized enterprises, and promote

agricultural development.

Poverty eradication and general economic development in Sri Lanka is guided by the

10-year Mahinda Chintana – Idiri Dekma, or Vision for the Future, which started in

2010. This policy calls for a participatory process of building the economy, involving

both the public and private sectors. Infrastructure is a major priority, and the

government aims to promote competition and accelerate growth in a way that will

help regions that have lagged behind.

The country’s agriculture policy emphasizes sustainable development with efficient

and effective use of resources. It aims to increase local food supply, incomes,

employment opportunities and exports by improving productivity of land and water

through modern practices and technologies. It calls for improving the productivity

of the plantation sector (which includes tea, rubber and coconut) as a means of

accelerating agricultural growth.

Rebuilding from the destruction resulting from the conflict with the Liberation

Tigers of Tamil Eelam, which ended in May 2009, is a major focus of poverty

eradication efforts. In addition to causing 70,000 deaths and displacing more than

500,000 people, the conflict devastated the food production capacity and purchasing

power of internally displaced persons, returnees, host families and other vulnerable

groups. Since the end of the conflict, the government has resettled tens of thousands

of internally displaced persons and has undertaken a number of massive

infrastructure projects to reconstruct the economy.

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IFAD’s strategy in Sri LankaIFAD has worked in partnership with Sri Lanka since 1978. Over that period, more

than 2.5 million people have benefited from 15 projects with a total value of around

US$372 million. We work in three main areas: dry zones, where most poor people

live; the estate sector (mainly tea and rubber) and surrounding villages, which have

pockets of extreme poverty; and coastal areas, many of them former conflict zones,

where people in poor fishing villages struggle to make a meagre living.

IFAD is concentrating on support to sustainable livelihoods and resource

management in these three areas. We are also working to establish a policy dialogue

on land tenure, decentralization and strengthening of the focus on rural activities

under the government’s poverty reduction strategy. Our strategy is well in line with

the Vision for the Future, with its call for participatory development.

A new project, the Iranamadu Irrigation Development Project will be presented to

the 104th session of the Executive Board in December 2011.

Projects: 15

Total cost: US$372.1 million

Total financing from IFAD: US$216.7 million

Directly benefiting: 518,332 households

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Colombo

Dry Zone Livelihood Support and Partnership Programme

Smallholder Plantations Entrepreneurship Development Programme

Post Tsunami Coastal Rehabilitation and Resource Management Programme

National Agribusiness Development Programme


IFAD loan: US$25.0 million

Duration: 2010-2015




Cofinancing: United States Agency for International Development (US$5.5 million); Wellassa RubberCompany (US$5.2 million)

Duration: 2007-2017




Duration: 2006-2013


Ongoing operations

National Agribusiness Development ProgrammeThis programme helps improve commercial agriculture by fostering joint ventures

between farmers and companies, allowing poor farmers to participate in agricultural

value chains as equal partners. Operating throughout the country except in the

Western district, it works with small-scale farmers (including women), landless

households and young people. The goal is to increase profits on the sale of farm

products, improve farm productivity, generate employment and increase incomes.

The programme also supports microfinance and training of young people in five of

the poorest districts (Ampara, Kegalle, Kurunegala, Puttalam and Ratnapura).

Smallholder Plantations Entrepreneurship Development ProgrammeThis programme works with participants in a resettlement scheme linked to

unproductive tea estates along with landless people in adjacent villages. It aims to

improve their livelihoods and access to social capital, community leadership and

entrepreneurship. The programme is supporting the government’s policy of

improving the productivity of old tea plantation lands by providing longer-term

leases for poor people under outgrower schemes. It also helps them gain better

access to tea markets and services and supports new and diversified rubber-based

cultivation by smallholder outgrowers. Both the tea and the rubber components

address community development and institution-building, processing and

marketing, and rural finance and credit.

Post-Tsunami Coastal Rehabilitation and ResourceManagement Programme In addition to the 31,000-plus people killed in Sri Lanka by the December 2004

tsunami, more than 400,000 people were displaced, and almost a quarter of them

were in fishing communities. More than 80 per cent of the national fishing fleet was

lost or damaged. This programme assists communities in recovering their assets and

re-establishing the foundation of their usual economic activities while they diversify

into new, profitable income-generating activities.

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IFAD grant: US$339,200

Cofinancing: Canadian InternationalDevelopment Agency (US$963,000); Japan Bank for International Cooperation(US$1.1 million); United NationsDevelopment Programme (US$1.5 million);World Food Programme (US$1.1 million)

Duration: 2005-2012


The programme, one of two focusing on tsunami recovery, concentrates on

infrastructure (particularly housing) and strengthening communities to manage

coastal resources sustainably. Women are being helped in particular to participate

in social and economic activities. The programme’s activities in the eastern districts

are coordinated with those of an Asian Development Bank coastal resource

management project.

Dry Zone Livelihood Support and Partnership Programme Poverty rates are high in the arid districts of the dry zone, where many people have

little or no land. This programme enables poor rural people to gain better access to

land and water resources, services, technologies and market linkages for better

incomes. It benefits small-scale farmers, particularly young farmers and women.

Activities begin with a participatory assessment of constraints affecting areas from

production to marketing, in both rainfed and irrigated farming. Extension services

are being provided through hundreds of farmer field schools, where participants

develop solutions that they disseminate to individual farmers. Programme activities,

such as tank rehabilitation and infrastructure development, are demand-driven.

Self-managed savings and credit schemes are set up for people without previous

access to credit, and at least 80 per cent of the beneficiaries are women.

New and existing microenterprises are also supported, with at least 50 per cent

women beneficiaries.

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Post-Tsunami Livelihoods Support and Partnership ProgrammeTotal cost: US$4.7 million


Duration: 2006-2011


Matale Regional Economic Advancement ProjectTotal cost: US$14.5 million


Cofinancing: German Agency for Technical Cooperation(US$571,000); World Food Programme (US$245,000)

Duration: 1999-2007


North-Central Province Participatory Rural Development ProjectTotal cost: US$19.6 million


Cofinancing: Japan (US$50,000); Swedish InternationalDevelopment Agency (US$3.3 million); World Food Programme(US$1.9 million)

Duration: 1996-2003


North-Western Province Dry ZoneParticipatory Development Project Total cost: US$18.0 million


Cofinancing: German Agency for Technical Cooperation (US$3.3 million)

Duration: 1993-2000


Second Badulla Integrated Rural Development Project Total cost: US$21.2 million


Cofinancing: United Nations Development Programme (US$2.5 million)

Duration: 1992-2002


Small Farmers and Landless Credit Project Total cost: US$17.8 million


Cofinancing: Canadian International Development Agency (US$6.5 million)

Duration: 1989-1997


Completed operations

Building a poverty-free worldThe International Fund for AgriculturalDevelopment (IFAD) works with poorrural people to enable them to growand sell more food, increase theirincomes and determine the directionof their own lives. Since 1978, IFADhas invested about US$13.2 billion in grants and low-interest loans todeveloping countries through projectsempowering about 400 million people to break out of poverty, therebyhelping to create vibrant ruralcommunities. IFAD is an internationalfinancial institution and a specializedUN agency based in Rome – theUnited Nation’s food and agriculturalhub. It is a unique partnership of 167 members from the Organizationof the Petroleum Exporting Countries (OPEC), other developingcountries and the Organisation forEconomic Co-operation andDevelopment (OECD).

International Fund for Agricultural DevelopmentVia Paolo di Dono, 44 00142 Rome, ItalyTel: +39 06 54591 Fax: +39 06 5043463E-mail: [email protected] www.ifad.org

December 2011

Enabling poor rural peopleto overcome poverty

Contacts Ya TianCountry Programme ManagerIFADVia Paolo di Dono, 4400142 Rome, ItalyTel: +39 06 5459 2062Fax: +39 065459 3062E-mail: [email protected]

Anura HerathCountry Programme OfficerKnowledge Facilitator660/8, Peradeniya RoadMulgampola, KandySri LankaTel: +94 77 9204127E-mail: [email protected]

For further information on rural poverty inSri Lanka, visit the Rural Poverty Portal:http://www.ruralpovertyportal.org

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Anuradhapura Dry ZoneAgriculture Project Total cost: US$22.0 million


Cofinancing: Asian Development Bank(US$6.2 million)

Duration: 1981-1988


Kirindi Oya Irrigation ProjectTotal cost: US$57.8 million


Cofinancing: Asian Development Bank(US$20.0 million); German Credit Institutionfor Reconstruction (US$13.3 million)

Duration: 1978-1985


Kegalle Rural Development Project Total cost: US$11.4 million


Duration: 1986-1995


Badulla Rural Development Project Total cost: US$18.1 million


Duration: 1983-1993


Coconut DevelopmentProjectTotal cost: US$30.4 million


Cofinancing: Asian Development Bank(US$12.0 million)

Duration: 1982-1987


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