Sri Lanka targets agricultural growth

Rising demand at home and weaker growth in the export market have prompted the Sri Lankan government to increase its focus on the agriculture sector, with improved food security a longer-term goal.

Agriculture is a pillar of Sri Lanka’s economy, accounting for 10.1% of GDP. However, 2014 was a difficult year for many producers, bringing a raft of challenges including adverse weather conditions and competition from imports.

The government will be hoping that a new strategy, aimed at strengthening the sector, will help boost both income and employment from agriculture, while also paving the way for Sri Lanka to achieve its target of reducing food imports and building an economy with agriculture at its core.

Stormy times

According to a report released by the central bank at the end of April, the contribution of agriculture to the wider Sri Lankan economy increased only slightly last year. While GDP rose 7.4% in 2014, the agriculture sector’s input edged up by just 0.3%, compared to an increase of 4.7% the previous year, largely due to challenging weather, the bank said.

The latest outlook report from the IMF – issued on May 5 – reflected the central bank’s findings. Sri Lanka experienced broad-based growth, according to the report, with the exception of the agricultural sector, which suffered from a drought early in the year, followed by heavy rains and flooding in the fourth quarter.

Indicators suggest that agriculture continued to underperform against other sectors in the early part of 2015. A central bank report issued in early May showed industrial exports in February growing 7.1% year-on-year (y-o-y), while farm produce exports expanded by just 0.8%. Higher spending on consumer goods, including food products such as rice, was cited by the bank as a key reason for the increase in Sri Lanka’s import bill and the widening of the trade deficit by 10.4% y-o-y in February to $638m.

Agricultural exports are also feeling the weight of higher demand for key products, including rubber and coconut, at home. Shortfalls in spice and nut production have also dampened international sales.

Policies for producers

Such shortfalls, together with supply gaps in the domestic market, will be targeted by the state through a series of initiatives, according to Sri Lanka’s president, Maithripala Sirisena. The president described the development of Sri Lanka’s agriculture sector as a priority for the government, with support to be offered to agricultural-based industries.

Part of this development will come through policies promoting a blend of traditional and modern practices, he explained. “Farmers should take steps to produce what is needed by the market, utilising new technology and expert knowledge while protecting traditional agricultural methods,” said Sirisena.

In an official statement marking his first 100 days in office on April 23, the president also highlighted the country’s heavy reliance on food imports, pointing out that the country had the capacity to be self-sufficient when it came to produce. “The natural resources, climate and weather are blessings to this land. With such assets we do not need to import LKR400bn ($3bn) worth of food,” the president said. “We have the objective to strengthen the local agricultural economy.”

Multi-pronged approach

The government’s plans to develop the sector will be rolled out over the coming months, Agriculture Minister Duminda Dissanayake announced in mid-May, led by the drafting of a coordinated national strategy.

Dissanayake explained that the National Agriculture Policy would provide long-term solutions as well as support the expansion of e-agriculture and agri-market developments. In addition, the ministry is producing a five-year action plan, as part of the short- to mid-term blueprint for boosting agriculture’s contribution to the economy, he said.

In a separate move, the minister said output would be increased by promoting cultivation between the two main harvest seasons, as well as strengthening financial support for farmers and expanding the use of technology to boost yields.

The government has already begun a campaign aimed at making domestic produce more competitive, illustrated by its decision to increase taxes in late April on imported onions and potatoes.

The sector should also benefit from lower energy prices which, in the short to medium term, will reduce the cost of transport and operating farm machinery. The sharp drop in oil prices is also expected to aid the country’s import bill, according to the IMF, reducing it by around $2bn for 2015.