Sri Lankan rupee overvaluation hurting apparel orders, jobs

Dec 26, 2008 (LBO) – Sri Lanka’s apparel exporters could win back 15 percent of orders now lost due to an overvalued rupee caused by high domestic inflation, if there was a realistic exchange rate, an industry official said.

The Sri Lanka rupee has fallen against the US dollar in December after the Central Bank eased intervention after it lost almost a third of its foreign reserves. On Tuesday the rupee traded around112.80 from 108.00 to the dollar three months ago.

The Join Apparel Forum (JAAF), an industry body representing garment export sector says Sri Lanka is losing about 15 percent of potential orders, because of currency overvaluation.

“Certainly we think it (the US dollar) should get to somewhere in between ideally 118 and 120 which would give us time to adjust ourselves especially in the first six months of next year,” says Ajit Dias, chairman of JAAF.

“If we can adjust our price we can get back that business of that extra 15 percent we are losing. Because then we are competitive and if we are competitive we can give anyone in this area a good run for their money.”

Overvalued

In 2007 Sri Lanka exported 3.3 billion US dollars worth of exports, helped by GSP+ trade concessions