This paper was presented as part of the MIMAP Project on Poverty Monitoring in Sri Lanka. It traces the relationship between macroeconomic policy changes and poverty in Sri Lanka. In particular, adverse movements at the macroeconomic level can exert a lasting negative shock on the poverty of vulnerable and high-risk groups. Hence, a sound empirical understanding of the relationship between the macroeconomic performance of the country and its level of poverty is of central importance for poverty monitoring. In tracing the relationship between macroeconomic policy changes and poverty in Sri Lanka, the authorpoints out that the economic welfare of individuals depend on four major sets of economic variables. (i) The stocks of productive assets owned by people, such as labour, human capital, land and financial assets; (ii) the return of these productive assets, such as wages, salaries, rent and interest; (iii) the market prices of consumer goods and services; and (iv) the availability, ease of access and cost of publicly provided goods and services.