The issue of regional differences indevelopment has moved to the center of the developmentdebate in Sri Lanka, partly after the release of regionalpoverty data. For the past many years, there have beensignificant and increasing differences between the Westernprovince and the rest of the country in terms of per capitaincome levels, growth rates of per capita income, povertyrates, and the structure of provincial economies. Thestructure of the report is as follows: chapter two looks atthe poverty/growth/agriculture nexus in the poorest regionsof Sri Lanka. It presents data on poverty and growth in thepoorest provinces, especially Uva and Sabaragamuwa, andprovides an analysis of factors associated with the ruralpoor. Chapter three provides an overview and briefdiscussion of the Government's agricultural policiesand programs. Chapter four identifies constraints thatrestrict farmers' incomes in the four poorestprovinces. It presents results from extensive stakeholderconsultations carried out in these provinces. These resultsare complemented with findings from the 2005 ruralinvestment climate assessment to identify some of thegeneral constraints in the agriculture sector in Sri Lanka.Chapter five presents the findings of an agriculturalresource audit of small-scale farmers in the poorest regionsthat analyzed production, poverty and market data. Thechapter identifies income opportunities, in particular for afew agricultural products with high income potential forpoor farmers, whose production could take off withappropriate interventions. This chapter also provides avalue chain analysis of these products and identifiesproduct-specific constraints and gaps in the current policyportfolio that could potentially limit the Government'scapacity to support the whole range of needed interventions.Drawing on the findings in previous chapters, chapter sixpresents' recommendations. One set of recommendationsis specific to the three products with high income potentialand focuses on effective interventions for their production.Another set consists of cross-cutting recommendations thatwould further improve performance in the targeted areas butalso benefit agricultural production more broadly. Chapterseven sums up and concludes.