By a special correspondent
Sri Lanka’s export sector is operating far below its true capacity, leaving an estimated $6 billion in potential earnings untapped and exposing the economy to mounting external risks. A recent assessment by the Asian Development Bank (ADB) paints a concerning picture: if this dormant capacity were fully activated, the country’s exports could surge by as much as 47%, providing a much-needed cushion as foreign debt repayments intensify in the coming years.
This gap is not merely a missed opportunity—it is a growing vulnerability. From 2028 onward, Sri Lanka faces a steep rise in external debt servicing obligations. To meet these commitments, the country will need to secure substantial foreign currency inflows. However, with exports underperforming, the burden shifts to limited foreign reserves and increased pressure on the rupee.
As of December 2025, Sri Lanka’s usable reserves covered only about three months of imports, a level widely considered precarious. The ADB warns that continued reliance on such thin buffers could weaken the Central Bank’s ability to stabilise the currency, especially as demand for foreign exchange rises.
The roots of the problem run deep. Between 2015 and 2024, Sri Lanka’s nominal exports grew by just 16% a stark contrast to the robust expansion seen in regional peers like Cambodia, India and Pakistan. This sluggish growth, combined with a surge in imports driven by post-war infrastructure and construction, has widened the trade deficit and intensified pressure on the balance of payments.
At the sector level, the ADB identifies apparel as the single largest source of unrealised export potential, accounting for $1.9 billion. Traditional exports such as tea, spices and nuts also hold significant untapped capacity. Yet the country’s export basket remains heavily concentrated, with textiles, garments, tea and rubber products making up nearly two-thirds of total merchandise exports over the past decade.
This lack of diversification leaves Sri Lanka highly exposed to external shocks. The COVID-19 pandemic offered a stark example: in 2020, exports plunged by 16% due to collapsing global demand for garments, compared to just a 2% contraction across the rest of developing Asia.
Beyond foreign exchange earnings, exports play a critical role in driving productivity and income growth. Export-oriented firms tend to adopt advanced technologies and pay higher wages, creating better employment opportunities. This is particularly evident in the apparel industry and the rapidly growing IT and business process management sector, which continues to attract skilled young workers with competitive salaries.
The ADB stresses that unlocking export potential is essential for long-term macroeconomic stability. Without a significant expansion in export earnings—alongside tourism and remittances Sri Lanka risks prolonged external imbalances and continued currency volatility.
In essence, the country’s export shortfall is not just an economic statistic; it is a central challenge that will shape Sri Lanka’s financial resilience in the years ahead.