Determinants of Agricultural Exports in Sri lanka:  A Gravity Model Analysis

Agricultural exports continue to be important to the Sri Lankan economy as a foreign exchange earner. However, its contribution shows a declining trend during the recent past and is reflected in individual sub-categories prompting the need to explore reasons and potential interventions. This study aims to identify the major factors affecting the performance of Sri Lanka’s agricultural exports using the gravity model. A panel dataset of 50 major trading partners of Sri Lanka from 1988 – 2019 was used. This study finds that both the trading partner’s GDP and Sri Lanka’s GDP and the number of sanitary and phytosanitary measures (SPS) have a significant positive effect on export performance. According to the results, the GDP of both countries, geographical distance, number of SPS, and TBT are the most promising factors that affect Sri Lankan agricultural exports. Despite that, the presence of regional trade agreements (RTA), a common language, a common border, and other non-tariff measures (NTM) are found to be insignificant for trade. The analysis suggests that selecting high GDP and low-distance countries as importers, diversification of export destinations, and quality maintenance of export commodities using non-tariff measures will increase agricultural exports in Sri Lanka.