Sri Lanka’s merchandise exports fell 9.54 per cent to 11,856 million US dollars in 2023, with December exports falling 11.5 per cent, data from the state Export Development Board showed in a year that the rupee appreciated amid better monetary policy.
The rupee increased from 363 to the US dollar in December 2022 to 323 by December 2023.
In December, when exports fell 11.25 per cent from a year earlier to 947.5 million US dollars, the rupee appreciated from 329 to 323 to the US dollar.
That exchange rate depreciation (the price of a US dollar measured in locally made paper) is determined by exports, imports or the trade deficit and is not a monetary phenomenon linked to the producer of the bad money – the central bank – is an idea dating back to classical mercantilism of the 17th century.
Sri Lanka’s central bank has been running a broadly deflationary policy (making outflows through imports less than inflows by absorbing liquidity from domestic money markets and moderating credit) since September 2022 and collecting foreign reserves.
Earlier the central bank was injecting money to maintain a policy rate, boosting credit and imports above dollar inflows.
Sri Lanka’s private credit has been negative or weak for most of 2023 and the non-interest budget deficit has also been brought down. Interest can be rolled over as paper and any central bank held bond coupons are also deflationary.
In 2022 when exports went up, the rupee fell and the balance of payments remained in deficit as the central bank printed money to sterilize interventions, including money loaned by India through the Asian Clearing Union.
In 2023, apparel exports fell 18 per cent to 4,864 million US dollars. December exports were down 8.6 per cent to 438 million US dollars.
Rubber-based exports fell 8.6 per cent to 930 million US dollars and coconut-based exports fell 13.7 per cent to 708 million US dollars. December rubber exports were up 3.57 per cent to 111 million US dollars, and coconut was up 2.02 per cent to 55.97 million US dollars.
Tea exports went up 4.06 per cent to 1,309 million US dollars and electronic exports edged up 0.62 per cent to 486 million US dollars.
Petroleum product exports were up 31 per cent to 372 million US dollars.