This paper assesses the economic impact of the Ceasefire Agreement (CFA) in the conflict-affected areas (North and East) in relation to the other areas, with 1996-2004 serving as the reference period. The key findings are as follows: (a) The GDP of the Northern Province (NP) grew by an annual average of 12.6% during the post-CFA period compared to 3.4% during the pre-CFA period; (b) the GDP of the Eastern Province (EP) increased by 10.1% per annum during the post-CFA period compared to 4.6% during the pre-CFA period; (c) the GDP of the North-Central Province (NCP) increased by 8.2% per annum in the post-CFA period compared to –0.2% in the pre-CFA period; (d) the NP grew twice as fast as the Western Province (WP) in respect of post-CFA GDP (12.6% versus 6.2% per annum).

The most positive feature of the post-CFA economic experience has been the phenomenal growth of the agricultural sector (in real terms) in the NP (32% per annum) and EP (19% per annum), compared to 4.3% and 4.9%, respectively, during the pre-CFA period. In the NP, annual paddy production averaged 138,000 metric tons during the post-CFA period compared to 65,000 metric tons during the pre-CFA period, while in the EP, the post-CFA average was 752,000 metric tons compared to the pre-CFA average of 619,000 metric tons. The combined share of the North and East in national paddy production is considerable higher in the post-CFA period (31%) than in the pre-CFA period (27%).

Post-CFA private sector investment in the North and East has also significantly increased in respect of certain sectors, such as banking, retail trade, and information communication technologies. For example, Dialog Telekom, which was not operating in the war zone prior to the CFA, has invested more than a million dollars in the Northern and Eastern Provinces since then. The company presently has 1.5 million mobile users, of whom 250,000 (17%) are located in the North and East alone. By comparison, the combined population of the North and East is only about 13% of the total.

Sri Lanka’s overall GDP growth rate has been moderately higher during the post-CFA period (5.0%) compared to the pre-CFA period (3.9%). Hence, the economy as a whole has yet to reap the full benefits of peace. Post-CFA economic growth has been significantly higher than the pre-CFA level only in the NP, EP and NCP. It could therefore be concluded that the economic dividends of peace have been realized mainly in the conflict zone (NP and EP) and adjacent areas (NCP).

click here to read the full article