The Sri Lankan Organic Farming Mandate

Aayat Hafezjee

In this blog I will examine the government’s sudden shift to organic farming, its disruption of agricultural production including crop failures and food shortages.


Sri Lanka became the first nation to require 100% organic farming in 2021 when the government passed one of the most drastic agricultural reforms with a nationwide ban on synthetic pesticides and fertilisers. The policy caused a serious agricultural crisis even though its goal was to establish Sri Lanka as a global leader in sustainable agriculture. Crop yields fell, food prices skyrocketed, and the economy, which was already precarious due to the Covid-19 pandemic, started to fall apart in a matter of months. Paikiasothy Saravanamuttu, an economist, said, "It was a case of throwing the baby out with the bathwater."


Background Info and Why the Policy was implemented

President Gotabaya Rajapaks is the one who pushed for organic farming to be introduced under the banner of health and environmental sustainability. However, economic factors also motivated the decision. Sri Lanka faced a severe foreign exchange crisis, and synthetic fertiliser imports accounted for approximately $400 million annually (World Bank, 2022). By banning them, the government aimed to reduce this burden.


But the decision overlooked the productivity gap between organic and conventional farming. According to research by the International Food Policy Research Institute (IFPRI), organic yields in staple crops like rice and maize are typically 19–25% lower than their conventional counterparts (Ponisio et al., 2015).


Figure 1: Impact of Organic Farming Mandate on the Rice Market in Sri Lanka

The supply curve shifts from S1 to S2 following the fertiliser ban due to lower yields from organic farming. With demand unchanged, the equilibrium price rises from P1 to P2, while quantity falls from Q1 to Q2. This results in a shortage, increased imports, and consumer hardship. The shaded triangle represents deadweight loss, a measure of inefficiency introduced by the mandate.

Consequences (Crop Failures and Food Insecurity)

The most dramatic impact was on rice, Sri Lanka’s staple crop. Before the ban, the country was self-sufficient in rice production. By early 2022, it was forced to import over 300,000 metric tons of rice, costing $450 million (FAO, 2022). Tea exports, which contributed $1.3 billion annually, dropped by 18%, leading to a foreign exchange shortfall (Central Bank of Sri Lanka, 2022).

The World Food Programme (2022) reported that over 30% of Sri Lankans faced food insecurity by mid-2022. Inflation in food prices reached 85%, and the agricultural sector, employing nearly 30% of the workforce, was devastated.

Poor Economic Planning

The main flaw in the mandate was that they didn’t have a gradual implementation. As Nobel laureate Amartya Sen noted, “Development is freedom. If policies reduce people’s capabilities to function, then they are failing.” Without sufficient training, infrastructure, or transitional subsidies, farmers were unequipped to adapt. According to the Sri Lanka Agricultural Economics Association, nearly 80% of farmers reported losses during the first year of only farming organically(SLAEA, 2022).

Moreover, the loss in agricultural income created a negative multiplier effect across rural economies, reducing spending and employment in local markets. In Keynesian terms, the fall in aggregate demand deepened the recession.

What We Learn

Sri Lanka’s story is a warning about the importance of getting policy decisions in the right order. While environmental sustainability is a great goal, economic transitions must have planning backed by complete evidence, correct phasing as well as institutional support.

Sri Lanka also shows market failure, specifically government-induced supply shocks. Intervention without coordination or even compensation can create worse externalities than the problem it sought to solve.

Conclusion

In conclusion, the organic farming mandate in Sri Lanka displays the importance of aligning policy intentions with economic realities. A well-hearted vision executed with inadequate preparation led to national food insecurity, social unrest, and economic collapse. Going forward, governments must pursue sustainability through inclusive, gradual reforms backed by science, not slogans.


References

Central Bank of Sri Lanka. (2022). Annual Report 2022. https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/annual-reports

FAO. (2022). Sri Lanka Rice Market Report. Food and Agriculture Organization of the United Nations. https://www.fao.org

Ponisio, L. C., M’Gonigle, L. K., Mace, K. C., Palomino, J., de Valpine, P., & Kremen, C. (2015). Diversification practices reduce organic to conventional yield gap. Proceedings of the Royal Society B, 282(1799), 20141396. https://doi.org/10.1098/rspb.2014.1396

Saravanamuttu, P. (2022). Quoted in "Sri Lanka’s Organic Crisis." The Guardian. https://www.theguardian.com

SLAEA. (2022). Survey of Farmer Impact Post-Fertilizer Ban. Sri Lanka Agricultural Economics Association.

World Bank. (2022). Sri Lanka Development Update: Securing the Recovery. https://www.worldbank.org/en/country/srilanka/publication/sri-lanka-development-update

World Food Programme. (2022). Sri Lanka Emergency Food Security Assessment. https://www.wfp.org


About the author
Aayat Hafezjee studies Environmental Sciences and Business Management, with a strong interest in Economics, originally sparked by Richard Thalers, ‘Misbehaving’. She’s interned widely, including at BNP Paribas in Finance, and has spent nearly 2 years employed as a Business Operations Specialist alongside her studies. She’s very active in the Economics field and serves as the Economics Blog Ambassador at Queen Mary University of London. Feel free to email Aayat at: a.hafezjee@hss24.qmul.ac.uk.

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