This report on poverty assessment in SriLanka establishes that the development story in Sri Lanka isone of mixed success. The country is on par with middleincome countries and Millennium Development Goal timetablesfor universal primary school enrollment, gender parity inprimary and secondary school enrollment, and universalprovision of reproductive health services. At the same time,consumption income poverty persists and the poor continue toface basic welfare challenges such as malnutrition. A numberof interrelated constraints prevent access by the poor toopportunities in more dynamic sectors of the economy. Inpoor rural areas and the estates economic and geographicconstraints include inadequate connectivity to markets andgrowth centers, lack of electricity and transport facilities(infrastructure) and poor quality schools (public services).In poor urban areas constraints include inadequate access toclean water, electricity, sanitation and quality of housing.At the household level, the report assesses the cyclicalnature of poverty traps caused by low levels of education,poor nutrition and underemployment (mostly associated withthe informal sector). Population in the estates, North andEast, and the tsunami-affected coastal areas are more likelyto fall into the poverty trap cycle due to historicaldisadvantages or recent events like civil conflict ornatural disasters. The report is organized as follows:Chapter 1 presents the Sri Lankan economy in aninternational context. Chapter 2 focuses on poverty,inequality and vulnerability. Chapter 3 profiles poorhouseholds and lagging regions. Chapter 4 discusses internalmigration, remittances and urban concentration. Chapter 5analyzes the human development challenges and the povertynexus. Chapter 6 talks about the rural challenge in terms ofraising agricultural productivity and non-farm incomes.Chapter 7 dissects the social and economic situation in theconflict-affected areas in the north and east, while Chapter8 concludes with the an analysis of the poverty traps in theestates and the way forward.