48007
FAX: [94] (1) 437345, 446013

Flag description: yellow with two panels; the smaller hoist-side panel
has two equal vertical bands of green (hoist side) and orange; the
other panel is a large dark red rectangle with a yellow lion holding a
sword, and there is a yellow bo leaf in each corner; the yellow field
appears as a border that goes around the entire flag and extends
between the two panels

Economy

Economy - overview: Industry - dominated by the fast-growing apparel
industry - has surpassed agriculture as the main source of export
earnings. The economy has been plagued by high rates of unemployment
since the late 1970s. Economic growth accelerated in 1991-95 as
domestic conditions began to improve and conditions for foreign
investment brightened. In 1996, however, a drought, slow economic
reform, and civil war exacted a heavy economic toll. Insufficient
monsoon rains caused power cuts that hurt industrial and agricultural
production, and the stepped-up Tamil insurgency reduced foreign
investment and tourism - two key sources of foreign exchange.
Meanwhile, Colombo's counterinsurgency efforts caused defense
expenditures to overshoot budget targets by 42%. In 1997, agricultural
production should recover from the effects of last year's drought, but
industry will still be hampered by high real interest rates, slow
improvement in foreign investment inflows, and stalled progress on
privatization. The government's main challenge this year will be to
curb defense and social welfare spending to cut the budget deficit as
a percentage of GDP in half by 1998, as stipulated in its deficit
reduction program.

GDP: purchasing power parity - $69.7 billion (1996 est.)

GDP - real growth rate: 3.7% (1996 est.)

GDP - per capita: purchasing power parity - $3,760 (1996 est.)

GDP - composition by sector:
agriculture: 23.8%
industry: 24.7%
services : 51.5% (1994)

Inflation rate - consumer price index: 15.9% (1996)

Labor force:
total: 6.2 million (1994)
by occupation: agriculture 42%, services 40%, industry 18% (1994)

Unemployment rate: 13.1% (1994)

Budget:
revenues : $3 billion
expenditures: $4.2 billion, including capital expenditures of $1
billion (1997)

Industries: processing of rubber, tea, coconuts, and other
agricultural commodities; clothing, cement, petroleum refining,
textiles, tobacco

Industrial production growth rate: 6.2% (1996 est.)

Electricity - capacity: 1.56 million kW (1994)

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