Sri Lanka has failed to diversify both its merchandise export basket and markets in the last 15 years

With the liberalisation of Sri Lanka’s markets in 1979 and the growth of the apparel industry, Sri Lanka made the transition from an agriculture-based economy to a manufacturing-based economy. However, in the past 15 years, Sri Lanka has failed to continue diversifying its merchandise export basket, leading to a heavy concentration in textiles and garments and its traditional exports of tea and rubber.

Textiles and garments, tea and rubber account for ~60% of Sri Lanka’s merchandise export basket. In addition to this, Sri Lanka has not succeeded in diversifying its merchandise export markets either. Sri Lanka is heavily reliant on the USA, European Union and UK as export destinations for its merchandise. ~50% of Sri Lanka’s merchandise exports are bound for these 3 markets. This double concentration has made Sri Lanka’s export industries highly vulnerable to changes in these markets.

Data sources: Central Bank of Sri Lanka