Changes in the living standards of the poor in Sri Lanka during a period of macroeconomic restructuring
1987
Sah, D.E.
Beginning in 1977, Sri Lanka moved away from its welfare-oriented economy characterized by extensive government intervention in controlling prices and expensive consumer subsidies towards a more market-oriented, outward-looking liberalized economy. Investment increased due largely to dramatic increases in the inflow of foreign capital combined with greater deficit financing. Unemployment declined and the rate of growth of GDP increased. The major increase in foreign assistance, coupled with deficit spending, enabled the government to undertake the ambitious infrastructure projects that stimulated demand. However this policy change had deleterious consequences for the poor. Rapid inflation which resulted in a decline of real wages, coupled with dramatic decreases in the value of the food stamp scheme, brought about a decline in calorie consumption for lower expenditure groups. In addition, levels of malnutrition, as measured by acute wasting, were higher after the policy change
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