Poverty alleviation is one of the greatest phenomenon that acquired a foremost priority within the development effort of Sri Lanka, mainly during the past few decades. Public sector has been playing a vital role in this endeavor. In the first phase of independence, social welfare was given highest priority. Free education, health services, food rationing, land reforms, subsidies for agriculture, control of the prices of essential food items etc. were among the major welfare and poverty alleviation measures in this phase. In addition to these measures, targeted poverty alleviation strategies were implemented in 1980s. As a result of these efforts, the nation has been able to reach to a reasonable level of social development and to reduce income poverty significantly.

The purpose of the present study is to assess the effects of public welfare policies on the reduction of rural poverty in Sri Lanka. The study is based mainly on the Hambantota district of southern Sri Lanka. Logistic Regression Analysis was employed to assess the effects. State of multidimensional poverty (Y) was the dependent variable. Six basic capabilities namely, Avoid hunger and food insecurity (Food capability-FOD), Free from illiteracy and having knowledge (Education capability-EDU), having a healthy life (Health capability – HEL), Access adequately to clean drinking water (Drinking water capability - DRW), Sheltered safely and adequately (Housing capability - HOU) and Access to improved sanitation (Sanitation capability - SAN) were used as independent variables.

The analysis concluded that food related public policies have played a significant role in reducing rural poverty. Though, public policies on health, housing, education, drinking water and sanitation have played a vital role, they have not still been able to provide adequate opportunities for the rural poor. Hence, public expenditure on those spheres can play a significant role in reducing rural poverty. Among the considered areas, public health policy is the comparatively most effective in reducing rural poverty, followed by housing and drinking water policies. Thus, expenditure on health can reduce rural poverty at a comparatively high rate. Education policy is less effective than other services.