Tuesday Jun 16, 2026
Tuesday Jun 16, 2026
Tuesday, 16 June 2026 00:00 - - {{hitsCtrl.values.hits}}
Recent commentary has argued that Sri Lanka’s exporters have become dependent on currency depreciation and that a weaker rupee is neither necessary nor desirable for export competitiveness.
While I agree that long-term competitiveness cannot be built on exchange rates alone, I believe the discussion misses several important realities faced by exporters on the ground.
The question is not whether a weaker rupee makes a country competitive.
The real question is whether Sri Lanka has created the conditions necessary for exporters to compete in the first place.
What actually happens when the Rupee falls?
The article presents a simplified example of a garment exporter selling a shirt for $5 and suggests that any benefit from a depreciation is quickly lost because imported inputs become more expensive.
That is only part of the story.
An apparel manufacturer receives export revenue in US dollars. Fabric, trims, machinery parts and certain chemicals are also purchased in US dollars. Therefore, on that imported component there is little net exchange rate impact.
Industry estimates generally place apparel value addition between 45% and 60%, significantly higher than many competing countries because of local manufacturing, design, development and services.
This includes:
When the rupee depreciates, the exporter receives more rupees for the same dollar revenue while these costs remain denominated in rupees.
This does not create a windfall profit.
What it often does is allow exporters to recover part of the continuous increases in wages, electricity, fuel, compliance costs and financing costs that have accumulated over time.
In many cases, it is the difference between earning a modest return and operating at a loss.
More importantly, margins matter.
Without margins there is no investment.
Without investment there is no automation.
Without automation there is no productivity improvement.
Without productivity improvement there is no movement up the value chain.
Ironically, the very investments that critics demand from exporters require the profitability that they often dismiss.
Sri Lanka is not selling a commodity
Another assumption in the article is that Sri Lanka’s exports are essentially commodities with no meaningful differentiation.
That may apply in some sectors. It does not accurately describe Sri Lanka’s apparel industry. If apparel were purely a commodity business, Sri Lanka would have disappeared from the global supply chain long ago.
Sri Lanka’s economic reality is straightforward. Our foreign debt obligations must ultimately be paid in foreign currency. Taxes collected domestically are collected in rupees. Therefore export growth is not merely a sectoral issue. It is a national economic necessity
We compete against countries with significantly lower production costs and much larger production capacities. Yet global brands continue to source from Sri Lanka.
Why?
Because Sri Lanka has earned a reputation as a trusted sourcing destination.
Sri Lanka supplies premium lingerie, sportswear and performance apparel to leading global brands. These relationships are built on compliance, innovation, sustainability and reliability rather than lowest cost alone
The relationship between a global brand and a strategic supplier is not identical to buying wheat, rice or crude oil.
The world’s leading brands continue to source from Sri Lanka not because we are the cheapest, but because we consistently deliver value beyond price.
The same principle applies to tea. Sri Lanka is not the largest producer of tea. Nor is it the cheapest.
Yet Ceylon Tea continues to command recognition and preference in many global markets because of its quality, heritage and reputation.
Consumers do not simply buy “tea.”
Many specifically buy Ceylon Tea.
To suggest otherwise ignores decades of brand building and market development.
The real reason margins are under pressure
The article correctly observes that exporters face constant price pressure.
But it identifies the wrong source.
The pressure does not primarily come because buyers notice currency movements.
The pressure originates from the final consumer.
Global consumers have become accustomed to continuously lower prices despite demanding:
Brands pass that pressure down the supply chain. Exporters are therefore caught between rising costs and declining prices. In that environment, exchange rate movements do not create competitiveness. They simply provide breathing space.
Singapore is not the right comparison
Singapore’s success deserves admiration. But it is not evidence that currency appreciation creates export competitiveness. Singapore succeeded because it built one of the most efficient business environments in the world.
It offers:
Capital flows to Singapore because investors know exactly what to expect.
Sri Lanka has historically ranked well below Singapore, Malaysia and many East Asian competitors in regulatory efficiency and investment facilitation. This is a stronger explanatory factor for weaker FDI inflows than exchange-rate policy.
The lesson from Singapore is not that a strong currency creates exports. The lesson is that a competitive business environment attracts investment.
Why Sri Lanka has not become an export powerhouse
For decades, every government has spoken about creating an export-driven economy.
Yet the policy framework often treats exporting as though it were no different from operating a domestic trading business.
Exporting is fundamentally different.
An exporter must:
This requires a policy framework specifically designed to support investment and risk-taking. Unfortunately, many of Sri Lanka’s structural constraints remain unchanged.
These include:
These are the issues limiting export growth.
Not the exchange rate.
A national priority: Earning dollars
Sri Lanka’s economic reality is straightforward. Our foreign debt obligations must ultimately be paid in foreign currency. Taxes collected domestically are collected in rupees.
The dollars required to service debt come mainly from:
Therefore export growth is not merely a sectoral issue. It is a national economic necessity.
Every additional dollar earned through exports strengthens Sri Lanka’s economic resilience.
Every investment that generates export income creates long-term national value.
This is why governments around the world actively compete for export-oriented investment.
The debate should not be whether exporters like a strong currency or a weak currency. The debate should be whether Sri Lanka has created an environment where exporters can thrive regardless of currency movements
What should Sri Lanka do?
Rather than debating whether exporters benefit from currency movements, we should focus on creating conditions that attract investment.
Key priorities include:
1.Modernising customs legislation and procedures.
2.Streamlining investment approvals through genuine single-window systems.
3.Reforming labour regulations to balance worker protection with investor confidence.
4.Improving legal and dispute-resolution systems.
5.Maintaining policy consistency over long periods.
6.Encouraging technology investments and productivity improvements.
7.Creating targeted incentives for export-oriented industries.
Many argue that all sectors should be taxed identically.
In principle, that sounds fair.
In practice, governments must encourage activities that generate the greatest national benefit.
An export manufacturer earning foreign exchange for the country is not identical to a purely domestic business serving the local market.
Countries across Asia have recognised this reality for decades.Nearly every successful export-led economy in Asia—including South Korea, Vietnam, China and Malaysia—used targeted incentives during their industrialisation phase.
Sri Lanka should not be afraid to do the same.
The real debate
The debate should not be whether exporters like a strong currency or a weak currency.
The debate should be whether Sri Lanka has created an environment where exporters can thrive regardless of currency movements.
A stable currency is desirable.
Low inflation is desirable.
Productivity growth is essential.
But none of these can substitute for a competitive investment climate.
If Sri Lanka wants higher exports by 2030, the priority is clear.
We must build a country where investors can start businesses quickly, operate efficiently, expand confidently and compete globally.
That—not the exchange rate—is the conversation Sri Lanka should be having.
(The author holds a B.Sc. in Business Administration and an MBA from the PIM, University of Sri Jayewardenepura. He is a Fellow of CIMA (UK) and a CGMA, with over 35 years of senior leadership experience in the manufacturing sector)
