Growing at an annual average rate of 6 percent since 2005, Sri Lanka has emerged as one of the most dynamic economies in South Asia. In 2010, the International Monetary Fund upgraded Sri Lanka to middle-income emerging market status. Performing much better than comparable economies, the Asian Development Bank predicts the country’s gross domestic product will grow by a robust 7 percent this year.


This comes despite 26 years of conflict between the government and the Tamil Tigers, which devastated the nation. With support from multilateral organizations and donors such as China, India, Australia and Japan, Sri Lanka emerged as one of the most successful post-conflict economies. The country’s solid economic performance has translated into impressive improvements in human development and poverty reduction. The country, ranked 97th overall, leads South Asia on the 2011 Human Development Index. Sri Lanka’s life expectancy (75 years of age), infant mortality (9.47 per 1,000 live births), and literacy (90.6 percent) levels are comparable to those of developed countries. The national poverty rate has plummeted 17.2 percentage points since 1991 to 8.7 percent.   


Yet despite these notable achievements in socio-economic development, Sri Lanka remains stunningly unequal. According to the Gini Index of wealth distribution, Sri Lanka is the 27th most unequal country in the world. While quality of life has markedly improved in urbanized areas, particularly in the Western Province, poverty remains entrenched in the conflict-affected north and east. In recognition of the uneven growth and development, President Mahinda Rajapaksa set as his administration’s goal sustainable, inclusive growth for Sri Lanka.


Consistent with that goal, in its 2011-2015 country strategy for Sri Lanka, the Australian Agency for International Development aims to support inclusive growth. Citing low social and economic indicators in lagging provinces, AusAID focuses on health, education and sustainable economic development to catalyze broad-based growth. To ensure sustainability and greater impact of its assistance, AusAID works with trusted development partners, such as the United Nations and the World Bank.


Funding levels 


In recent years, with humanitarian funding increasing, Australia’s development assistance to Sri Lanka has generally been on the rise. But after a shift in Australia’s aid priorities — less reconstruction and recovery, more sustainable development — official assistance to Sri Lanka dropped to 47.1 million Australian dollars ($48.9 million) in 2012-2013, down 13.4 percent from previous levels. Of this amount, AusAID manages AU$43.2 million for its development work in the country. 



Despite the recent dip in funding, analysts are expecting Australia to maintain its development interests in the country, which will likely result in a modest aid program through 2015. Any increases in Australia’s foreign assistance, however, will be based on demonstrated effectiveness of aid programs and strong bilateral relations between the two countries.   


Funding priorities (fiscal 2012-2013)


Consistent with Australia’s long-term objective of stable, resilient and prosperous nationhood for Sri Lanka, AusAID’s aid program for the middle-income country is anchored along five strategic goals: (1) promoting opportunities for all, (2) sustainable economic development, (3) saving lives, (4) effective governance, and (5) humanitarian and disaster response.


For fiscal 2012-2013, funding allocations are as follows:  



Through 2015, AusAID’s priorities in the middle-income country are recovery and infrastructure; sustainable livelihoods; and social protection, including improved access to basic services. Citing the concentrated nature of Sri Lanka’s poverty, AusAID initiatives target the lagging Northern, Eastern, Central, Sabaragamuwa, and Uva provinces. Guided by the Government’s Mahinda Chintana – Vision for the Future, AusAID’s assistance focuses on health, education and sustainable economic development.


Harmonizing efforts for ensured sustainability and greater impact, AusAID is partnering with the World Bank and Sri Lankan government for key education and infrastructure initiatives:


  • Transforming Schools Education Program (AU$37 million) — aims to improve access to, quality, and management of primary and secondary education in Sri Lanka.
  • North East Local Services Improvement Project (AU$38 million) — supports local government authorities in the rehabilitation, construction, and maintenance of essential public infrastructure (i.e., minor roads bridges, and irrigation systems) in conflict-affected areas.


Devex analysis


Last December, Australian foreign affairs minister Bob Carr was in Colombo to boost cooperation in the fight against human smuggling. Limited job prospects at home and promises by smugglers of visas and well-paid work have driven marginalized Sri Lankans to board boats bound for Australia. Addressing the root of the problem, the Australian government has opted to crack down on human smuggling by investing in Sri Lanka’s long-term development. Expecting a surge in refugees, the Gillard administration diverted a record AU$375 million of its aid budget to asylum-seekers in the country, sparking an outcry. Australian nongovernmental organizations and some members of the opposition decried the move, saying that the money should have been spent on strengthening communities in poor countries. Standing by the decision, Carr stressed that diverting funds was a move in line with guidelines from the Organization for Economic Cooperation and Development, which considers funds appropriated to support asylum seekers within a donor country as official development assistance.


To reaffirm Australia’s commitment to Sri Lanka, the Australian government will attend the Commonwealth Heads of Government Meeting to be held in Sri Lanka this November. Canada is boycotting until the human rights situation improves in the middle-income country. Canadian Prime Minister Stephen Harper stresses that the Sri Lankan administration should accept accountability for alleged human rights abuses and war crimes committed in ending the 26-year long conflict.


If Sri Lanka can continue on a path of peace and development, it is possible that Australia significantly draws down or completely phases out its aid program for the country post-2020.



Australian High Commission, Sri Lanka

21 Gregory’s Road, Colombo 7

Sri Lanka

Tel.: (94-11) 246-3200

Fax: (94-11) 268-6453




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