Adjustment of Exchange Rate and its Impact on Sri Lanka’s Agriculture under Policy Reforms

Abstract

This paper empirically evaluates the performance of the Sri Lanka’s agricultural sector under policy reforms with respect to the exchange rate implications. Under the policy reforms, the exchange rate reforms made considerable impact on the agriculture exports, input and food imports and economic development. In our analysis which used general equilibrium growth accounting approach, the real contributions of agricultural exports, food imports and fertilizer price reveals that without the exchange rate reform the contributions would have been really detrimental to the agricultural production and economy of Sri Lanka. Therefore, policy reform had a positive effect on Sri Lanka Economy through the exchange rate reform, though it had negative impact on domestic food production sector and related small farmers.