Sri Lanka’s exports now less competitive in global market

Due to high interest rates, inflation and fuel cost

By Hiran H. Senewiratne

With the low agricultural productivity level, Sri Lanka must adopt modern methods to increase exports, while being self-sufficient", a top economist said.

 "By developing the productivity level through diversification, differentiation and value addition, we must target more export markets. Therefore, by increasing our exports especially in the agriculture sector, we could manage our trade deficit to a greater extent," President of the Organization of Professional Associations of Sri Lanka (OPA), Prof A. D. V de S Indraratna said

"Today, our exports have declined due to global recession especially in the USA and the Euro zone, which purchased 60 percent of our apparels. Apart from that, our exports have also become less competitive due to high interest rates, inflation and fuel cost, he said.

According to Central Bank statistics Sri Lanka earned US$ 4.023 billion via export earnings during the first five months of this year, a year-on-year decline of 5.4 percent compared to the corresponding year.    

Meanwhile, the country’s import expenditure during the period has jumped to US$ 8.20 billion during the same period, a year-on-year increase of 7.8 percent. But due to the depreciation of the Sri Lankan rupee and high interest rates, imports have come down considerably during the last few months, he said.     "The trade deficit during January to May this year stands at US$ 4.184 billion, which has widened by 24.7% year-on-year".

Prof. Indraratne said the country should focus its exports towards East since China and India are major emerging markets.

"Signing of trade agreements with those countries will not be beneficial to Sri Lanka if we do not increase our exports to balance the trade deficit. Therefore, exports should increase faster than the imports to serve this purpose,’ he said.                       

"Due to the recession in USA and Euro zone, the demand for our exports especially apparels   declined significantly in the first few months of 2012, Deputy Secretary to the Treasury S. P. Attigala of the Department of Fiscal Policy of the Ministry of Finance and Planning, said.

He said if this recession continues in US and Euro zone demand for apparels will decline further and our exporters will find it difficult sell their products to these markets, he said.       

Export Development Board (EDB) Chairman Janaka Ratnayake said that the board would submit a proposal for Rs. 1 billion to support the sector in addition to the development funds received in the current Budget.

According to data for June 2012, the industry had registered over US$ 900 million exports during the month, bringing down the decline to 4 percent   There are expectations to close the year at US$ 11 billion or more as the industry anticipating better times ahead, especially during the next six months.

Exports to GDP ratio has declined from 32% to 17% from 2000-2011, while contribution to world trade has declined from 0.9 percent to 0.6 percent.  However, the government’s has to reach US$ 15 billion by 2015, he said.

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