解锁斯里兰卡与印度的贸易（英）

KEY POINTS Unlocking Sri Lanka’s Tradewith India •Sri Lanka’s export growth hasbeen slow and concentratedacross a few products andmarkets, contributing tomacroeconomic vulnerability. Jules HugotSenior EconomistSARD, ADB Dinuk de SilvaSenior Economics AssistantSouth Asia Department (SARD),Asian Development Bank (ADB) •India offers major untappedexport potential, but nontariffbarriers and weaknessesin the Indo–Sri Lanka FreeTrade Agreement persist. Chethana RanatungaConsultantSARD, ADB •Key reforms to boostexport competitivenessinclude removingpara-tariffs, streamliningexport procedures,and upgrading theIndo–Sri Lanka FreeTrade Agreement. EXPORTS ARE KEY FOR SRI LANKA’S GROWTHAND RESILIENCE This brief explores how Sri Lanka can deepen trade with India.It discusses leveragingSri Lanka’s location and existing exporting sectors, and addressing the limitations of theIndo-Sri Lanka Free Trade Agreement (ISFTA) to expand and diversify trade. The briefbuilds on estimates of export potential by the International Trade Centre. Sri Lanka’s weak exports have strained its current account, contributing tomacroeconomic weaknesses.The country’s exports have underperformed most peereconomies. From 2015 to 2024, the country’s nominal exports rose by just 16%, belowCambodia, India, and Pakistan (Figure 1). A broad-based rise in imports, together with theconstruction boom that followed the end of the civil war in 2009, widened the trade deficit,strained the current account, and contributed to the depreciation of the Sri Lanka rupee. Strengthening exports is crucial to prevent rupee depreciation as Sri Lanka’sdebt repayment accelerates from 2028.The Treasury will need to purchaseforeign currency to repay creditors, putting pressure on the rupee. In turn,the Central Bank of Sri Lanka (CBSL) may use foreign reserves to support thecurrency, leaving fewer resources available for imports. As of December 2025,usable reserves covered only around 3 months of goods imports.1Expanding this buffer ISBN 978-92-9277-751-7 (print)ISBN 978-92-9277-752-4 (PDF)ISSN 2071-7202 (print)ISSN 2218-2675 (PDF)Publication Stock No. BRF260122-2DOI: http://dx.doi.org/10.22617/BRF260122-2 to external shocks affecting these specific sectors or markets.This was notably evident in 2020, when the country’s exportsfell by 16% as global demand for garments collapsed during thecoronavirus disease (COVID-19) pandemic.5In contrast, exportsin the rest of developing Asia contracted by just 2%. is thus critical for macroeconomic stability, and this requiresboosting export earnings, alongside tourism receiptsand remittances.2 Exports foster productivity and create high-paying jobs.Exporters typically adopt advanced technology and implementhigher technical and labor standards to compete globally andattract skilled workers. This is especially relevant in Sri Lanka,where labor costs exceed those in regional peers like Bangladeshand Pakistan. Although more recent data is not available, in 2004,Sri Lanka’s exporters paid on average 35% more and were 13% moreproductive than firms that do not export.3These trends are visiblein the apparel sector, and even more so in the IT and businessprocess management sectors, which offer top salaries for younggraduates, 46% of whom were women in 2022.4 REALIZING SRI LANKA’S TRADEPOTENTIAL WITH INDIA Sri Lanka has about $6 billion unrealized export potential,of which $808 million is with India.This unrealized potentialis calculated by combining estimates of supply origin country,product, and destination (Box). The results suggest thatif the potential were fully met, Sri Lanka’s exports wouldincrease by 47%. The largest unmet export potential is toIndia ($808 million per year), followed by the US, the People’sRepublic of China (PRC), Italy, and Germany (Figure 3,panel A). At the sector level, the main opportunities includeapparel ($1.9 billion), followed by tea, and spices and nuts(Figure 3, panel B). Limited diversification exposes Sri Lanka to external shocks.For the past decade, textiles and garments, tea, and rubberproducts have made up around two-thirds of merchandiseexports, with the United States (US), the European Union,and the United Kingdom (UK) accounting for 56% of exportson average (Figure 2). This concentration heightens exposure Box: Export Potential Methodology This brief draws on export potential estimates produced by theInternational Trade Centre (ITC) for 226 economies and 4,490products. These estimates are compared with actual trade flowsto identify unrealized export potential. Ease of trade.This infers the strength of bilateral trade linkages bycomparing bilateral exports with a scenario where the exporter’smarket share in the importing country would equal its global marketshare. This captures features such as geographical proximity,established trade connections, and cultural and linguistic similarities. The export potential index (EPI) is calculated for eachorigin–destination–product combination. In