📈 Import Dependency Erodes Sri Lankan Export Competitiveness

A critical paradox faces Sri Lankan exporters: the recent 3.6% to 4.5% depreciation of the rupee (reaching Rs. 321–325 in the spot market and Rs. 334 at bank selling rates) is hurting profit margins instead of boosting global competitiveness due to a heavy reliance on imported inputs. • Overall Performance & Disconnect Merchandise exports hit a historic high of US$ 13.5 Bn in 2025, with Q1 2026 earnings up 3.4% YoY to ~US$ 3.4 Bn. Despite strong headline numbers, rising operational and logistics expenses are causing a disconnect between revenue growth and weakening profitability. • Surging Input Costs Overall spending on intermediate goods climbed to US$ 1.26 Bn in March 2026—the highest since December 2021—following a massive US$ 11.8 Bn total expenditure in 2025. The national fuel import bill surged by 74.7% YoY to US$ 630 Mn in March alone, accounting for nearly half of all intermediate goods imports. • Sectoral Impact Apparel & textiles, rubber products, plastics, and light engineering face intense margin squeezes due to skyrocketing costs for imported fabrics, chemicals, and machinery parts. Traditional pillars like tea remain core drivers of revenue, but global buyers resist price increases, forcing firms to absorb cost spikes internally. • The National Outlook Based on data from the National Chamber of Exporters (NCE), prolonged currency instability threatens long-term employment, capacity expansion, and market share. Stakeholders urge immediate macroeconomic stability and structural reforms to enhance domestic value addition, reducing the economy's vulnerability to global exchange rate shocks.