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For many years, Sri Lankan companies have called for currency devaluations to help them compete with low-cost Asian producers. In the past month, the reform of the Central Bank of Sri Lanka devalued the rupee by 14%.
Exports of clothing and tea have experienced a 22% increase in the past year, and the official set the same growth target for this year, which may cause exports to exceed US$13 billion.
Sri Lankan Director of the Export Development Authority of Sri Lanka. Lanayak said that this goal is currently increasing the challenge. The main challenge will be the impact of the devaluation of the rupee. Exporters have demanded a devaluation of the rupee for many years, which has a direct impact on their export earnings. But our main export products, such as apparel, are based on imports. Because of the devaluation of the rupee, the cost of imports will increase and profits will decline.
The apparel-led industrial sector, which accounts for 80% of total export revenue, mainly relies on imports of raw materials and machinery.
On Monday, after the Sri Lanka Central Bank decided not to intervene on February 9, the Sri Lankan rupee recorded a location of 131.60 rupees against a dollar. Lanayak said that in North Africa and the Gulf region, many key markets will experience turmoil.
The Export Development Agency of Sri Lanka expects that in 2015, export revenue will increase by 50% to 15 billion U.S. dollars and reach 20 billion U.S. dollars by 2020.
While the economic growth of many developed countries in the world has slowed down and the euro zone is trying to get out of the debt crisis, Sri Lanka is looking for more export destinations in Asia in order to increase export revenues, Lanayak said.
The share of Sri Lanka’s exports to Europe and the United States has fallen from 61% in 2005 to 54.1% last year, while the share of exports to Asia has increased by 3%.
Sri Lanka's apparel exporters hope that the devaluation of the Sri Lankan rupee will drive this year's boom, but at present they are starting to feel disappointed because the rising costs of imported raw materials have hurt profits, the Sri Lanka Export Development Authority said.