Labour market

Impact of multiple crises on Sri Lanka’s micro, small and medium-sized enterprises

This study set out to inform the labour market disruptions caused by the multiple crises do provide for an unprecedented opportunity for the Sri Lankan labour market to reset with a MSME business recovery model at centre stage.

Sri Lanka’s economy is retreating from unprecedented crises thanks to the Government’s determined efforts to stabilize the economy, reinforced by a new External Fund Facility that the International Monetary Fund approved in March 2023. But the crises and stabilization measures have impacted jobs and earnings in a labour market long constrained by high levels of informality and youth unemployment and low levels of women’s labour force participation. Much of the success of employment recovery and growth will be predicated on the performance of the micro, small and medium enterprises (MSMEs), which accounted for 75 per cent of the employed workforce in 2013, according to the National Economic Census of that year, and 99 per cent of Sri Lankan business enterprises.

This study set out to inform the labour market recovery and transformation strategies by analysing the impact of the multiple crises on MSMEs. It aimed to provide insights about areas that require policy support to boost MSMEs’ performance and stimulate job creation. Hence its first objective was to understand the impact of the crises on MSMEs and the specific challenges that they have encountered. The impact of the crises was examined in terms of business operations, sectoral differences and, most importantly, change in employment. The second objective was to learn what coping strategies that surviving enterprises had adopted, identify the constraints to survival or recommencement and then assess the institutional support currently available and accessed by MSMEs.