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Speeches & Transcripts February 15, 2022

Knock Knock 2022 Conference: The Doorway to Success with a special theme on Agriculture, Dairy and Fisheries

Governor of the Central Bank of Sri Lanka, Mr. Ajith Nivard Cabraal, distinguished panel of experts and guests, Ladies and Gentlemen. Ayubowan, Vanakkam, and Good morning.

I am pleased to join you today for this very important event to discuss the future of Sri Lanka’s Agriculture, Dairy and Fisheries sectors.

Sri Lanka, like many other nations, is navigating challenging times, and needs an ‘all hands-on deck’ approach to unleash its untapped potential and build back better for all its people.

I congratulate the organizers for convening public and private sector experts to share insights that would inspire policy actions and public support for a stronger Sri Lanka.

The COVID-19 pandemic and subsequent economic downturn have posed a significant challenge on the years of progress Sri Lanka has made in its efforts toward poverty reduction and Sustainable Development Goals.

To support local economy and peoples’ livelihoods, the Agriculture, Dairy and Fisheries sectors are indeed key to Sri Lanka’s green, resilient and inclusive recovery from the COVID-19 pandemic shock.

These sectors are not only essential to realize Sri Lanka’s food security and peoples’ livelihoods, but they also have the potential to scale up Sri Lanka’s growth ambitions through innovation and job creation.

To do this, consistent and concerted efforts are required, with public and private sectors working together with other partners in development.

The World Bank’s Green, Resilient and Inclusive Development framework—or GRID framework—emphasizes that policies and investments for recovery from this unprecedented shock can’t just be business-as-usual, nor can they focus on singular challenges.

Instead, they must consider the complex links among environmental, socioeconomic, and financial sustainability; links among risks and uncertainties related to climate change, recessions, financial shocks, and natural hazards; and links between inequality and poverty.

Sector Overview

The agriculture sector contributes 7 percent to GDP and employs about 27 percent of the population. It forms the primary source of livelihoods for rural communities.

In addition to contributing to food security, the sector also provides raw materials for the manufacturing sector, especially in the manufacturing of food, beverages, tobacco, and rubber products. These products total more than 40 percent of manufacturing outputs.

And agricultural exports—comprising major plantation crops such as tea, rubber, coconut, and spice crops—amount to almost a quarter [23.3 percent] of the trade earnings. They also directly contribute to another 12.5 percent of industrial exports.

Dairy production used to be a traditional component of local farming systems in Sri Lanka. Yet the availability of dairy products is largely dependent on imports from major dairy producing countries.

The local milk production contributes only to 39 percent of the national supply in liquid milk equivalents (LME). It has the potential to grow ensuring modern global standards of the industry.

The fisheries sector also contributes significantly to livelihoods and food security in Sri Lanka.

Sri Lankans derive about half of their animal protein from fish—about three times the global average.

Coastal and marine fisheries provide full- or part-time direct or indirect employment to about 900,000 people and thereby support the livelihoods of some 3.6 million Sri Lankans. But the sector contributed only 1.9 percent of GDP and 1.5 percent of export revenues in 2019 – a modest contributions to the overall economy.

Sri Lanka’s coastal fisheries make up 57 percent of fish catch among all types of fisheries – coastal, offshore and aquaculture – and are critical for domestic food security.

Offshore fisheries take place in Sri Lanka’s exclusive economic zone and in the high seas, targeting tuna and billfish. While only 16 percent of the tuna caught meet export-quality standards, they contributed 45 percent of the fishery sector export revenue in 2019.

Currently, the aquaculture subsector mainly focuses on shrimps in the northwest, generating about 7 percent of fishery sector export earnings.

Challenges and opportunities

Let me now turn to the key challenges and opportunities in these sectors.

The agricultural sector is highly vulnerable to the impacts of climate change and other threats such as degradation of land and water resources.

Extreme weather events have become a constant source of risk faced by farmers and fishers alike. Growing population and declining quality of natural resource base has created significant pressure on biodiversity.

Transforming the agriculture sector into a modern and commercially diversified sector of high-value products remains the key to creating jobs, delivering nutritious food, generating export revenues, and bringing prosperity to rural areas.

In the dairy sector, given the high dependence on imports, the government has made demand-side interventions time-to-time to cushion the consumers from price fluctuations.

Government interventions have helped increase the share of domestic production in the total supply. However, fluctuations in the world market and vulnerabilities of domestic production system continue to affect the availability and access to milk and dairy products in Sri Lanka.

The main challenge in coastal fisheries is that many of the commercially targeted stocks are dwindling, evidenced by decreases in catch and earnings by fishers. Many coastal ecosystems are stressed and degraded from habitat destruction and pollution, directly contributing to the decline of certain stocks.

Coastal species such as lobster, cuttlefish, wild-caught shrimp, mud crab, and sea cucumber hold promise for higher export revenues and more secure jobs by tapping into higher-value market segments. But scientific, evidence-based stock management is needed as some of these stocks are also likely to be overfished.

One of the key challenges of the offshore fisheries sector is the high rate of post-harvest quality loss.  The Sri Lankan fleet is not well-equipped to prevent postharvest quality deterioration during long trips at sea. This reduces the amount of exportable fish catch.

Growing global and domestic demand for seafood offers an important opportunity for Sri Lanka to sustainably expand aquaculture production, employment, and business opportunities for the private sector.

To capture this potential, the government has an ambitious program to broaden coastal aquaculture into sea bass, seaweed, sea cucumber, mud crab, marine ornamental fish, and bait fish.

Sustainable and resilient growth of Sri Lanka’s aquaculture sector depends on smart zoning with clear and consistent regulations, new knowledge and technology, and support to de-risk private investment.

Modern technology and an ‘Ecosystem Approach to Aquaculture’ can intensify aquaculture to increase outputs and revenues, while reducing environmental impacts.

World Bank support in Sri Lanka

The World Bank has been working with the Government of Sri Lanka to help address some of these challenges and seize opportunities in the Agriculture, Dairy and Fisheries sectors through investment, analytical and advisory services.

Out of the existing portfolio of US$2.36 billion, 12 percent is geared toward the agriculture and, to some extent, fisheries sectors. We also recently conducted an in-depth analytical study in the fisheries sector.

A core principle of the World Bank’s agricultural support program is private sector-led agricultural transformation to connect smallholders to domestic and global value chains. This involves stimulating private investments in agribusiness innovations.

The nation-wide matching grant scheme of the Agriculture Sector Modernization Project leverages private investments in sub-sectors like shrimp farming, fresh fruit, and spices, using matching grants to crowd in private finance.

As of December 2021, 371 matching grants worth US$51 million leveraged US$98.7 million of additional fund from private sources in the form of beneficiary contributions and commercial borrowing. It also created backward and forward linkages to estimated 55,900 small farmers.

These grants have already generated positive impacts for beneficiaries as well as the economy—for example, US$20 million in new agriculture exports from farm clusters.

Promoting innovative technologies, especially among smallholder farmers, is another critical focus of these projects in improving productivity and value addition.

The Agriculture Sector Modernization Project is training groups of small farmers in new technologies and introducing new cash crops, focused on economically disadvantaged areas.  The project also helps them set up their own Public Unlisted Company (PUC) to facilitate marketing.

The Climate-Smart Irrigated Agriculture Project is pioneering climate-smart agriculture technologies with farmers in climate change hotspots and supporting more climate-resilient irrigation infrastructure. It is also exploring new technology applications, such as real-time agro-meteorological information, digitalization of public services to farmers, and digital market platforms to link farmers and buyers.

The Integrated Connectivity Development Project will soon be supporting new forms of climate resilient infrastructure that improve market connectivity and enhance supply chain and access to services for farmers through public and private investments in agricultural infrastructure and logistics.

For the fisheries sector, the World Bank and the Government of Sri Lanka embarked in 2020 on an in-depth analysis of Sri Lanka’s marine fisheries, coastal aquaculture and ecosystems that support them, focusing on coastal fishery, offshore fishery, and coastal aquaculture sub-sectors.

This analytical work aims to support the government in prioritizing investment and policy actions to enhance the welfare and resilience of marine fishing communities and fisheries contribution to the economy considering the COVID-19 pandemic and climate risks.  It is expected that a final report will be launched by early March.

Transformations on the ground

Finally, I would like to end with a few examples already happening on the ground.  A few months ago, I had an opportunity to visit and witness first-hand the transformation underway to lives and livelihoods of farmers.

In Puttalam, a matching grant project is supporting the shrimp cluster—including a nauplii center, hatcheries, and small shrimp farmers—and helped revive an industry that was previously significantly impacted by disease and lack of technology. Through this project, hygienic breeding practices have been introduced, creating jobs through value addition, and the shrimp exports have nearly tripled in four years.

Similarly, banana cultivation farmers in Anuradhapura are making profits through new farming practice and value addition introduced by the project and reaching export markets. The impact that this project has brought to farmers’ lives can be summarized in the words of one of the banana farmers, when he was asked what has changed, “I was a farmer before. Now I am ‘businesspeople’!”

These are just a few examples of small ‘transformations’ already changing people’s lives and there are many more stories. With the right information, right technologies, and resources and partnerships from the public and private sectors, these experiences can be replicated and scaled up to create greater ‘transformation’ in millions of peoples’ lives.

The World Bank will be happy to continue supporting the government and people of Sri Lanka, and help unleash the potential of the Agriculture, Dairy and Fisheries sectors to enhance Sri Lanka’s export revenues, employment, and food security in a sustainable manner.

Thank you very much for your attention and I hope today’s fruitful discussions and learning will pave the way to increased collaboration and partnerships for a green, resilient, and inclusive agriculture, dairy, and fisheries sectors.

Thank you, Nandri, and Bohoma isthuthi!