While Sri Lankas apparel exporters stand to benefit from the rupees devaluation, the cost of living - including food and fuel - is set to rise.

While Sri Lanka's apparel exporters stand to benefit from the rupee's devaluation, the cost of living - including food and fuel - is set to rise.

Sri Lanka's apparel exporters say a surprise 3% devaluation of the Sri Lankan rupee, introduced in last week's national budget for 2012, will work in the industry's favour.

Although the export apparel industry is a large importer of raw material, import costs are not expected to increase as a result of the devaluation because the industry's import-export transactions are in US dollars and not in rupees. But the sector will gain significantly when converting dollars into rupees to meet local operating costs.

"We import 50% or more of our inputs, but most local apparel companies import in dollars and earn in dollars," explains Mr Sarathchandra Illeperuma, deputy chairman of the Sri Lanka apparel Exporters Association.

"So the devaluation will not impact import costs. But the devaluation is a huge advantage in helping factories meet increasing operating costs in the country."

The devaluation is also expected to make 'Made in Sri Lanka' apparel more competitive in export markets.

However, trade unions note that the devaluation will increase the cost of living inside Sri Lanka because the price of all imported goods - including food and fuel - will increase. This, say trade union sources, will increase calls for higher wages.

The minimum wage in the garment sector is LKR7,950 (US$69.73), and the industry is estimated to have around 30,000 vacancies despite an ongoing recruitment campaign.