Sri Lanka's traditional economy has been agricultural with rice being the main food crop. Spices, tea, rubber and coconuts were especially encouraged by the British under the colonial system and are still an important part of the economy. Apart from these there were more exotic products like precious stones and even elephants and peacocks which were exported. However in recent years there has been a thrust on developing new areas. One of these has been textile and garment manufacturing which has overtaken tea as an export earner.

Another big export earner is tourism which has shown resilience inspite of the dragging military conflict in the north, probably because of the remarkable efforts of the industry and the natural wealth of the country.

Contributing also are Sri Lankan's working abroad-mainly in the oil rich countries of the Persian Gulf-who reemit as much as U.S $1.5 billion annually.

The opening of the economy to private enterprise with encouragement to invest in key areas has led to total government disinvestment from certain areas, achievement of self sufficiency in rice production and setting up of large irrigation and hydro electric projects like the Mahaweli River scheme. Several development projects today receive IMF and World Bank assistance. The biggest stumbling block in economic progress has undoubtedly been the Tamil war which with the tripling of the armed forces has increased expenses on defence to approximately 20 % of total government expenditure. Per capita income in 1993 was US$ 465 per annum, unemployment over 13 % and inflation over 11%.