Abstract
The process of economic liberalization launched in Sri Lanka in 1977 produced high growth rates, falling unemployment, and higher levels of economic activity. It has also suffered ethnic violence, the steady escalation of the civil war against the Tamil Tigers, and the brutal repression of a youth insurgency movement. The centre‐right United National Party (UNP), which steered the reforms, lost its majority position in Parliament in 1994, and the Presidency later the same year. The liberalization, accompanied by high inflation, a reliance on indirect taxation, stagnation of real incomes, an imperfect welfare net and increasing unemployment, affected different social groups disproportionately and made class and ethnic divisions worst while benefiting the sectors of society from which the UNP drew its main support.
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