The Sri Lankan economy has experienced a balance of trade deficit over the past four decades and this paper attempts to identify the macroeconomic variables which have influenced such a situation. Thereby, this study is mainly focused on four exogenous variables including an endogenous factor which may affect the external balance of an economy. The model used in this study is developed for the first order autoregressive process as used by many research studies carried out in the recent past relating to this area, by using the quarterly data from the 2000Q1 to 2015Q2. According to the empirical results, it was observed that gross domestic product; volumes of imports and inflation rate have a significant impact on the balance of trade deficit in the Sri Lankan economy. A nominal exchange rate and direct foreign investments have not influenced the current situation. There is a positive relationship between the exchange rate and the trade balance which is not a significant factor and this result is not supported by the latest studies carried out. Thus, it can be concluded that the policy measures taken during the past four decades of Sri Lankan economic history regarding the exchange rate has had little less an influence in rectifying the external balance problem in Sri Lanka.

An open economic policy was introduced by Sri Lanka in 1977, before many other countries in Asia to align her economy to world economic trends. Before 1977 Sri Lanka mainly followed an inward looking economic policy whereas from 1977 onwards Sri Lanka adopted an outward looking or open economic policy. After 1977 with the introduction of the open economic policy, indigenous businesses had to compete with foreign products, processes, technology, innovations and businesses. Hence, doing businesses in this context was very complex as well as more dynamic than in the past. In the year 1977 Sri Lanka converted from public entrepreneurship to private entrepreneurship. Therefore, the country triedto develop through private entrepreneurship from 1977; not only because it the engine of growth, but also to align the country's development process to world inclinations. The year 2010 was a milestone in Sri Lankan history to achieve the developmental goals when Foxbuisness rated Sri Lanka as the best performing global economy. However, Sri Lanka missed her chances of achieving development with the political and social chaos, consequent the regime change in 2015. To support the fundamental assumption of engine of growth, Sri Lanka must develop an entrepreneurial culture through creativity and innovation. In this endeavor, creativity and innovation will definitely play a pivotal role to achieve the desired level of development with competitive advantage. This type of a development will be an example to the rest of the world and Sri Lanka will be held as a "Model State" for others to follow in today's context as it was done in the past in Singapore. It is important to get the support of Universities, other educational institutions and organizations which support businesses in the country to develop an entrepreneurial culture in the country and the Government's support with a national level policy for an entrepreneurial culture. All of these will give sustainability to entrepreneurial culture movement in the country. At the same time, the development of the entrepreneurial culture must be associated with creativity and innovation to gain competitive advantage over the development strategies of other countries and other emerging countries like Sri Lanka. An entrepreneurial culture will help minorities, women and under privileged societies to empower themselves. At the same time it will help to confront and manage youth unrest which has created anarchy in the country from time to time.

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