Sri Lanka 20 Percent Depreciation of the Rupee
Sri Lanka’s trade deficit will top USD 10 billion in 2011 and will continue growing in 2012. The reason being while Sri Lanka’s largest export markets, the US and EU suffer from weak or no growth, its imports are inelastic; i.e. not sensitive to changes in price. Sri Lanka imports all its essential goods from food, e.g. wheat and sugar, to its energy needs. Even coal and oil needed to generate electricity are imported. Inputs into its largest export, textiles, are imported – it does not manufacture the yarn or the capital goods necessary to produce the finished good. Defending the rupee at its current level while its export competitors have devalued their currencies by as much as 40 percent makes its produce expensive.










