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The non-state sector participation in education continued to expand in 2015, according to the Central Bank. It said there were 104 private schools approved by the government (including schools for children with special needs) functioning in Sri Lanka by end 2015. The student population in private and international schools increased to 5.1% of the total number of students in the general education system in 2015, from 4.9% in 2014, revealed the Central Bank in its 2015 Annual Report. Although 149,572 students were eligible for admission to a university at the GCE Advanced Level examination in 2014/2015, only 25,624, i.e., 17%, were admitted to state universities due to capacity limitations. The limited number of places in the state university system, as well as changing preferences, have been typically accommodated by increased international migration for higher education purposes, thereby creating a significant outflow of foreign exchange reserves and a drain of talent from the country. However, a parallel system of non-state higher education institutes affiliated with foreign universities has developed in recent times to fill these gaps to a certain extent, which, if managed properly, could help retain a large amount of foreign exchange within the country. As at end 2015, 16 Non State Higher Education Institutes have been recognised as “Degree Awarding Institutes”, conducting 64 degree programs. There were 2,035 students following such programs, either on an full time or part time basis, who graduated during the year. In addition, more than 60,000 students were enrolled in various programs, including diploma and affiliated degree programs in these institutions. The Ministry of Higher Education and Hi g h w ay s (MHEH) facilitated review panels and the Standing Committee on Accreditation a n d Q u a l i t y Assurance (SCAQA). Furthermore, the institutions affiliated with foreign universities awarding foreign qualifications, as well as institutions awarding international professional qualifications, continued to attract a large number of students. It is observed that these developments have evolved over the years due to the acute shortage of educational opportunities in the country. Given the limitations that the government faces in providing required resources, private sector education has evolved as a natural alternative. This has to be taken into account exclusively when making education policies in the future. As education is a catalyst in the development process, Sri Lanka should carefully restructure its strategy in education where both public and private sectors exist in parallel. The need for proper monitoring and quality assurance is essential in this context, to ensure that there would be no space for low quality education.