Abstract
Sri Lanka, a country in the tropical region, has experienced cyclical droughts of high intensity, occurring in intervals of three to four years. These droughts have had a series of adverse impacts on the economic and social life of people in the country. This study attempts to assess the economic costs of drought and farmers’ adaptation strategies to drought with the intention of informing the policies which address drought-related economic vulnerability among farm households in Sri Lanka. Data were drawn from 540 farm households in the North Central Province (NCP) in the dry zone of Sri Lanka, in 2015. Results indicate that drought weakens agricultural production, food consumption and the investment capability of farm households, while also increasing indirect costs such as those arising in relation to healthcare. Thus, immediate measures, particularly income mediating policies to provide compensation to drought-affected families, are required to avoid multiple impacts of drought to farm households and to the provincial economy.