Inflation & exchange rate imbalance

Inflation and instability in the exchange rate have the power to deplete any economy and these two factors are currently ailing Sri Lanka. Rupee depreciation is hampering the garment manufacturing industry and Statistics reveal that around 100 small and medium garment factories have closed down over the period of 18 months. The apparel industry, which once boasted of around 800 factories, has now gone down to 350 to 400.

“The country is facing inflation mainly due to increase in Government expenditure as it fuels extra cost. Even though US dollar is losing its value, economic imbalance in Sri Lanka has led to rupee depreciation, disabling it to exploit the favourable scenario,” said Mr Ajith Dias, Chairman of the Joint Apparel Association Forum (JAAF).

While talking about effects of instable exchange rate in the apparel industry, Mr. Dias said that Sri Lankan companies and business entities, who import raw materials, have to pay more because of the depreciating rupee. This affects profitability, by driving up costs not only of raw materials, but also wages, utilities food and transport. We are facing difficulty in competing and JAAF is seriously concerned as the cost of production in Sri Lanka is increasing.