Sri Lanka in 1981: Year of Austerity, Development Councils, and Communal Disorders

Abstract

FOUR MAIN DEVELOPMENTS deserve review. On the economic front, like other countries that have tried the experiment, Sri Lanka experienced the gains and the pains of opening up the economy with the help of the IMF. Heavy capital investment made real progress but contributed to large bugetary deficits, inflation surged to nearly 40% during the year but was brought down to a reported 18-20%, foreign investment contributed to reducing unemployment and diversifying Sri Lanka's production and exports, while peasant agriculture did well in the face of poor rains. But traditional tree crop output slipped once again and adverse terms of trade added to the balance of payments deficit. Second, in the political realm, Development Councils were established in 24 districts, their decision-making and fund-rasing authorities were defined, and their membership selected by the first island-wide elections under the new PR system. Third, in communal relations, elections to those Councils, which were established largely to assuage Tamil grievances, were the occasion for intensified ethnic agitation on both sides. Renewed communal violence preceded the elections in Jaffna and erupted in the south six weeks later. There were hopes that enough authority and resources would be available to the Development Councils to breathe life into the decentralization effort. The Tamil leadership's vigorous repudiation of violence as a legitimate means in the independence campaign would, it was hoped, further isolate the radicals as the bulk of the Tamil activists would come to see the utility of the new Councils. Fourth, on the party front, disarray in the Sri Lanka Freedom Party was even more severe than it had been in 1980. The Old Left, the CP,