ABSTRACT
In many respects Sri Lanka appears to be a rather well-developed country; yet at the same time it is very poor, ranking among the thirty poorest countries in the world. The Sri Lankan economy is, and has long been, closely integrated into the global economy. Price increases were small prior to 1977, as inflationary pressures were by and large suppressed by price controls and rationing. With the new economic policy after 1977 this picture changed completely. As changes in prices impact on real incomes, this field is relevant to any analysis of the effects of the new policy on different groups of the population. During the 1970s the food subsidy system formed one of the cornerstones of Sri Lanka’s welfare policy towards large parts of the population. After the shift of government in 1977 this system was reformed substantially, with significant effects on the standard of living of the poorer sections of the population.
