Business
‘A currency that works for all: Why we need balance, not strength’
In the ongoing debate on Sri Lanka’s currency direction, much of the noise focuses on the strength of the rupee. A stronger rupee, many argue, will ease import costs, tame inflation, and bring short-term consumer relief. While this narrative may be politically expedient, it risks overlooking the deeper structural consequences for Sri Lanka’s export economy—the engine that earns our foreign exchange and sustains millions of livelihoods.
The hard truth is this: an artificially strong rupee is not a sign of economic health. It is a distortion that may win applause from consumers in the short term, but at the devastating cost of export competitiveness, job creation, and long-term resilience.
Misaligned currency
Sri Lanka’s export sector is not a small sideshow. It contributes over 20% of GDP, directly supports 1 in 4 jobs, and generated USD 16.17 billion in total export earnings in 2024, with merchandise exports contributing USD 12.77 billion and services USD 3.47 billion. Of this, the apparel industry alone accounts for nearly half of merchandise exports, employing over 350,000 people directly—the vast majority being women from rural communities.
When the rupee is overvalued beyond what market fundamentals dictate, Sri Lanka’s exporters are forced to compete on global markets with inflated cost structures. Every artificially appreciated rupee erodes our margins, makes Sri Lankan goods less competitive, and undermines the viability of our factories and supply chains.
For apparel exporters, even a 1% appreciation of the rupee against the dollar can mean a margin compression of up to 3%, given the tight cost structures and price sensitivity of global buyers. Over time, this pushes orders to lower-cost competitor markets like Bangladesh, Vietnam, and Indonesia—all of whom maintain prudent, export-supportive currency regimes.
The situation is further complicated by the fact that the current level of the rupee is not a true reflection of Sri Lanka’s macroeconomic fundamentals. Much of the country’s external debt servicing remains temporarily suspended. Until those repayments recommence, the rupee remains artificially elevated, distorting price signals and export margins.
Balance over strength
No serious economy targets a ‘strong currency’ at all costs. Successful export-led economies—from China to Vietnam—aim for currency stability and competitiveness, ensuring their exporters have a level playing field.
For Sri Lanka, the goal should be no different. A market-reflective rupee that is aligned with our productivity levels, cost base, and external balances is essential for sustainable growth. This does not mean chasing devaluation recklessly, but resisting the temptation to prop up the currency using scarce reserves or distortionary policy interventions.
Moreover, the World Bank and IMF both caution that currency misalignment in fragile economies often leads to unsustainable balance of payments gaps, import surges, and eventual crises—a painful lesson Sri Lanka knows all too well.
A currency for everyone
At its core, the currency debate is not about exporters versus importers, or rural versus urban interests. It’s about ensuring that our economic fundamentals are healthy, balanced, and sustainable for all Sri Lankans.
A stable, market-driven rupee allows our exporters to remain competitive, ensures that our debts are manageable, and gives investors confidence. Over time, this builds the foreign reserves needed to moderate inflation, fund essential imports, and support social welfare.
Theoretically, a stronger rupee should reduce import costs and offer price relief to consumers. But in practice, this has not materialised. Prices of essentials and everyday goods have remained largely unchanged at the supermarket, suggesting that the currency strength has not trickled down to tangible household savings.
We need to move beyond the outdated obsession with currency ‘strength’ and focus instead on currency sustainability—one that works for exporters, consumers, businesses, and the economy as a whole.
In a country where exports must lead the recovery, we cannot afford a currency policy that ignores the very sectors that bring in the dollars.
By the Joint Apparel Association Forum (JAAF) ✍️
Sri Lanka’s economic growth for 2026 will be around 4-5 percent, Central Bank Governor Dr. Nandalal Weerasinghe said.
The Governor indicated the estimated economic growth while announcing the Central Bank’s policy agenda for this year, last Thursday.
‘The Central Bank’s 2026 growth estimation is higher than the growth prediction of the IMF and the World Bank and is achievable, the Governor told the media while announcing the Central Bank’s policy agenda for 2026.
Dr. Weerasinghe added: ‘The Central Bank will introduce a benchmark intra-day reference exchange rate this year to ensure transparency in the foreign exchange market.
‘The absence of a reference exchange rate has held back the expansion of the Sri Lankan forex market and discouraged the trading of rupee-denominated derivatives Governor said.
‘The Central Bank last year carried out the necessary preliminary work to implement the benchmark spot exchange rate.
‘The benchmark intra-day reference exchange rate will be introduced in 2026 to foster a transparent foreign exchange market.
‘This benchmark will guide market participants, help reduce volatility and promote more competitive pricing on a given date, thereby enabling the introduction of more innovative products in the foreign exchange market.
‘Sri Lanka’s foreign exchange market has limited derivatives like currency swaps and options aiming to deepen markets and attract inflows.
‘However, these instruments failed after a lack of reliable reference exchange rate amid concerns over excessive speculation, rupee over-appreciation risks and interventions distorting clean floating rates.’
Meanwhile, currency dealers welcomed the move and said it will help to deepen the market.
“This will expand the market with more products and promote rupee-denominated derivatives, a currency dealer from a local bank said.
“It is something the market wanted to fix in derivative prices. This is a pricing mechanism for the rupee, he added.
By Hiran H Senewiratne ✍️
Business
Sevalanka Foundation and The Coca-Cola Foundation support flood-affected communities in Biyagama, Sri Lanka
With funding support from The Coca-Cola Foundation (TCCF), the Sevalanka Foundation has launched a humanitarian relief programme to support flood-affected communities in Biyagama. The initiative focuses on restoring access to safe water, healthcare services, and essential public facilities during the critical recovery period following the Cyclone Ditwah.
Working closely with the Divisional Secretariat, the program prioritizes the cleaning and rehabilitation of contaminated dug and tube wells, helping address the urgent post-flood challenge of access to safe water. This intervention will also support the cleaning and reopening of essential public spaces, including schools, and Grama Niladhari (GN) offices, enabling authorities and communities to resume daily activities safely. The Sevalanka Foundation and TCCF, as part of the initial response, have also donated water pumps to the Divisional Secretariat to support immediate water extraction and clean-up efforts.
In addition, as the second main component of the project, and based on the guidance of the Medical Officer of Health (MOH), support is being provided to MOH-operated healthcare facilities to restore access to emergency and essential medical services. This support includes sanitization, debris removal, hazard stabilization, and the provision of emergency medical supplies such essential medicines and hygiene products. Medical camps staffed by doctors and senior nurses will be conducted through MOH offices to provide prioritized groups of persons with health, nutrition and hygiene related relief items.
CSE activities were extremely bullish yesterday mainly due to the UK government’s announcement on tariff free access for local apparel sector exports into the UK coupled with Central Bank Governor Dr Nandalal Weerasinghe’s positive outlook on the economy this year.
Amid those developments the turnover level also improved and the All Share Price Index moved up to the 23500 mark during the trading day.
The All Share Price Index went up by 127.17 points, while the S and P SL20 rose by 56.75 points. Turnover stood at Rs 8.5 billion with 18 crossings.
Top seven crossings were: LOLC Holdings two million shares crossed to the tune of Rs 1.18 billion; its shares traded at Rs 575, Renuka Agri 45 million shares crossed to the tune of Rs 594 million; its share price was Rs 13.20, Sampath Bank 1.4 million shares crossed for Rs 215 million and its shares traded at Rs 154.35, Renuka Holdings 1.5 million shares crossed for Rs 75 million; its shares traded at Rs 50, Hayleys 200,000 shares crossed to the tune of Rs 41.3 million; its shares traded at Rs 207, Tokyo Cement (Non-Voting) 400,000 shares crossed for Rs 37.8 million; its shares sold at Rs 50 and NTB 100,000 shares crossed for Rs 326 million; its shares sold at Rs 326.
In the retail market top seven companies that contributed to the turnover were; LOLC Rs 340 million (591,000 shares traded), Sampath Bank Rs 310 million (two million shares traded), Renuka Agri Foods Rs 275 million (19.4 million shares traded), ACL Cables Rs 238 million (2.3 million shares traded), Overseas Realty Rs 215 million (4.9 million shares traded), CIC Holdings (Non Voting) Rs 180 million (6.3 million shares traded) and Wealth Trust Equity Rs 132 million (8.2 million shares traded). During the day 269.3 million share volumes changed hands in 47852 transactions.
It is said the banking and financial sectors performed well, especially Sampath Bank, while a top diversified company, LOLC Holdings, also performed well.
Yesterday, the rupee opened at Rs 309.15/30 to the US dollar in the spot market relatively flat from Rs 309.10/50 the previous day, having depreciated in recent weeks, dealers said, while bond yields opened higher.
The telegraphic transfer rates for the dollar were 305.8500 buying, 312.8500 selling; the British pound was 409.7568 buying, and 421.1186 selling, and the euro was 354.0809 buying, 365.4441 selling.
By Hiran H Senewiratne ✍️
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