JAAF says rupee depreciation driven by global pressures, not economic decline

The Joint Apparel Association Forum (JAAF) said the recent depreciation of the Sri Lankan rupee must be viewed in the context of wider global pressures, including the conflict in the Middle East, rising global fuel prices and increasing shipping costs.

JAAF noted that a weaker rupee should not be interpreted as a sign that Sri Lanka’s economy is underperforming, according to a statement. 

This position is also consistent with recent comments by Central Bank Governor Dr. Nandalal Weerasinghe, who noted that exchange rate movement alone cannot be used as the sole measure of the country’s economic health, as currency depreciation has a number of positive implications.

The Central Bank Governor has also pointed out that Sri Lanka is not facing this pressure in isolation. In recent weeks, the Indian rupee has faced renewed depreciation pressures driven by higher oil prices, persistent capital outflows, and a stronger US dollar. 

While the Sri Lankan rupee has depreciated by 4.8% against the US dollar, the Indian rupee has depreciated by 6.4%, the Nepalese rupee by 6.2%, and the Indonesian rupiah by 5.2%, the statement said. 

This shows that currency depreciation is currently a global and regional phenomenon, unlike in 2022, when Sri Lanka’s exchange rate pressure was driven by a domestic economic crisis.

 “The current movement of the rupee must be understood within the correct context. This is not a Sri Lanka-specific situation. Global factors, including instability in the Middle East, higher fuel costs and rising shipping costs, are placing pressure on currencies across emerging and developed economies alike. India and several other countries are also seeing their currencies depreciate, which shows that this is part of a wider global adjustment,” said Felix Fernando, Chairman of JAAF. 

He added that a weaker rupee, if managed with stability and discipline as is currently being done, can in fact support export competitiveness and strengthen Sri Lanka’s external position.

“A weaker rupee does not mean the economy is failing. For export sectors such as apparel, a more competitive exchange rate will make exports more competitive, thereby helping protect jobs, strengthen foreign exchange earnings and support the wider economy. At a time when Sri Lanka needs to build reserves and increase foreign currency inflows, exporters have an important role to play,” Fernando said.

JAAF said the country’s focus should be on maintaining confidence, avoiding speculation and supporting industries that generate foreign exchange, it added. 

The Association added that a competitive exchange rate, together with stable policy, efficient logistics and lower operating costs, can help Sri Lanka protect its recovery while strengthening its position in global markets.