Sri Lanka's path to middle income status has been remarkable in several ways. Over the long-term, the country has managed consistently high GDP growth rates and strong outcomes in education, health and poverty reduction, despite facing a 26-year conflict. The end of the conflict ushered in an acceleration in growth, with real annual growth rates in GDP per capita exceeding 7 percent from 2010 to 2012. However, this acceleration proved temporary, with the rate of growth reverting back to the long-term average of 4 percent in each of the four years from 2013-2016. The “peace dividend” that Sri Lanka experienced was surprisingly limited in scale and duration, and exposed weaknesses in the sustainability of Sri Lanka’s growth moving forward. The country's path to development must now change to sustain more rapid convergence with high-income countries and to deliver higher levels of well-being to all parts of the country.

In January 2015, Sri Lanka elected a new government with a vision of promoting sustainable development and reconciliation. As Sri Lanka's political institutions undergo an important transformation, economic changes will also be required to put growth on a more sustainable and more inclusive footing. The Center for International Development (CID), through financial support from the Open Society Foundations (OSF), is collaborating with the Government of Sri Lanka (GoSL) in an applied research project to help the country move toward this future and learn through the process.

Since late 2015, CID has conducted applied research through its Growth Lab Program and action research through its Building State Capability Program on a broad range of issues related to economic growth and transformation in Sri Lanka. As of October 2017, the project is focused on work by CID’s Growth Lab in pursuit of three main objectives that have emerged from research to date: empowering exporters to compete globally; upgrading knowhow for diversification; and achieving dynamic and inclusive growth across regions.