A new study by the Institute of Policy Studies of Sri Lanka (IPS) highlights the significant contribution of Sri Lanka's agrifood sector to the economy and identifies opportunities to drive export growth through high-value agriculture and agro-processing. The study finds that while primary agriculture accounts for 8.3% of Gross Domestic Product (GDP), the broader agrifood sector contributes 24.5% of GDP and 42.0% of total employment, underscoring its importance for economic growth and job creation.

Authored by IPS Research Fellow, Dr Asanka Wijesinghe, the study shows that food and beverage manufacturing offers considerable potential for economic transformation. An input-output analysis reveals that every USD 1 of final demand for food and beverage manufacturing generates USD 1.85 in total economic output, compared to USD 1.20 for primary agriculture.

The research also identifies six export clusters with strong growth potential; namely, cinnamon, other spices such as pepper and vanilla, coconut-based products, fruit and vegetable processing, seafood, and tea. Coconut-related exports exceeded USD 1 billion in 2025, while fruit and vegetable processing exports grew by 302% over the past decade. Seafood exports have also recorded strong growth, supported by preferential market access under Generalised Scheme of Preferences Plus (GSP+).

Commenting on the findings, Dr Wijesinghe notes, "Developing food processing based on agricultural commodities offers a direct pathway from agriculture to industry. Agriculture supplies 38% of food processing inputs, while food processing sources 19% of its inputs from domestic agriculture. Strengthening agricultural productivity and expanding processing are therefore critical to sustaining growth."

The study which was conducted as a part of the Country Growth and Jobs Report of World Bank, finds that the sector's growth potential is constrained by complex tariff structures, policy uncertainty, low investment in agricultural research and development, and inadequate support for value-added production. It recommends strengthening high-value, export-oriented agribusiness to enhance Sri Lanka's export competitiveness, create higher-productivity employment, and support long-term economic development.

Download the publication via the IPS website: https://www.ips.lk/high-value-and-export-oriented-agribusiness-unlocking-agri-food-sector-potential-in-sri-lanka/