12 Finally, we establish the robustness of our results to concerns about seasonality and the concurrent Covid-19 pandemic shock. Our results are robust to using deseasonalized versions of our outcome variables (Appendix Figure A6).<sup>29</sup> The Covid-19 pandemic, still ongoing in 2021, would only bias our estimates if it affected imports of banned and non-banned fertilizers to different degrees, which we do not have a strong reason to expect. Still, we implement a falsification test by obtaining DID estimates with the treatment period redefined to start in March 2020 (when Covid-19 arrived) instead of May 2021. The results show that fertilizers who would eventually be banned in 2021 did not suffer a relative import decline in the early months of the pandemic (Appendix Figure A7).

# **IV.B Fact 2: Rice and Tea Production Declined Significantly After the Ban**

We start by examining the production of Sri Lanka’s primary food crop, rice, covering about 40% of total arable land. Figure IIa plots the year-to-year evolution of average rice yields in the main (Maha) growing season.<sup>30</sup> From a high of around 4,500 kilograms per hectare (kg/ha) in 2020, Maha rice yields declined precipitously to below 3,000 kg/ha in 2022. This represents a 31.6% decline in yield relative to the historical average of the previous nine years. The observed rice yield decline is very similar when we use our granular remote sensing estimates. This decline cannot be explained by observed weather variables that typically influence agricultural production (such as temperature, rainfall, sunlight, and vapor pressure): even after controlling for fluctuations in such variables, we still find a 24.4% yield decline relative to the historical average (Appendix C.D).<sup>31</sup> Figure IIb shows that rice imports were negligible before the import ban, as Sri Lanka had achieved self-sufficiency in rice production, but, starting in late 2021, rice imports surged up to January 2022, remaining elevated throughout the rest of the year. Even this surge was not enough to fully make up for lost production, though, with the availability of rice for domestic consumption falling by 22% between 2021 and 2022.<sup>32</sup> Figure III presents rice yields at the DS level for the last Maha season before the ban (September

> internationally traded commodities such as fertilizer.

> 29Both outcome variables (extensive and intensive margins) are deseasonalized by subtracting their HS8 productmonth-specific averages in 2017-2019, before the fertilizer ban.

> 30The Maha season is the main rice cultivation season in Sri Lanka, running from September to March of the following year (the second season, Yala, runs from May to August).

> 31Ozdogan et al. (2024) confirms that the notable decline in remote sensing rice yield estimates over the 2021-2022 period cannot be explained by variation in environmental variables and is directly correlated with the reduction in fertilizer availability ensuing from the import ban.

32We define the amount of rice available for domestic consumption in a given year as the sum of production and net imports. This amount fell from 5.2 billion kg in 2021 to 4 billion kg in 2022. Since we lack trade data for November and December 2022, we instead compute net imports for 2022 based on the period from November 2021 to October 2022. Correspondingly, net imports for 2021 are computed based on the period from November 2020 to October 2021. If there had been no change in net imports, rice availability in 2022 would have been 3.40 billion kg. Therefore, the import surge offset one third of the production losses.