The Sri Lankan economy has been closely linked to the global economy mainly through trade, foreign remittances, foreign direct investment and tourism. This situation should theoretically bring about adverse impacts on the domestic economy when the global economy is in crisis. The objective of this paper is to assess the effects of the Global Food and Financial Crisis on the economy in Sri Lanka and to ascertain the extent to which the policy response of the government helped in minimizing the adverse impacts with special reference to the agricultural sector. The paper first evaluates the trends in macro-economic indicators, and then calculates the degree of price transmission from the world market to the domestic market, and next documents the policy measures implemented by the Sri Lankan government during the periods of pre-crises, food crisis and the financial crisis. The findings indicate that trade has acted as the primary channel through which global shocks have passed on to the Sri Lankan economy. The impact of the terms of trade shock on the national income in Sri Lanka was quite significant during the food crisis period and a recovery was evident during the times of the financial crisis period. Though the fuel prices have been transmitted efficiently into the domestic economy, especially during the food crisis period, the transmission of world prices into the domestic economy has been less than perfect for many agricultural sub-sectors. Although price hikes in certain agricultural subsectors such as milk and wheat can be attributed to the world price hikes, the price changes of rice (i.e. the staple food of the country) in the local market found to be primarily driven by the changes in internal market conditions. A close examination of the local policy environment reveals that a diverse array of trade policies and price policies has been implemented on various agricultural sub-sectors in the country during the periods under consideration. All in all, the policy response of the Sri Lankan government towards the agricultural sector seems liberal during the food crisis period and more protectionists during the financial crisis period. Furthermore, an increase in investments in agricultural research is also evident over the time. The current policy focus of the Sri Lankan government is to develop its agricultural economy through an inward looking strategy, yet the global crisis situation can be considered as only one of the factors, among many, that made the policy makers to adopt such strategies.