There is evidence to suggest that a situation of crisis has been building up in the rural areas of Sri Lanka since the mid-1980s. However, this picture does not match with World Bank’s finding in its Poverty Assessment on Sri Lanka (World Bank 1995). This paper examines the apparent contradiction between the conclusions of the World Bank’s report and structural trends in rural Sri Lanka. It is contended that the World Bank’s conclusions about recent poverty trends are seriously open to question, if not simply wrong. The paper examines the World Bank’s approach to the agrarian crisis and suggests that its policy conclusions on the aspects of rural development in Sri Lanka are misplaced.