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Foreign exchange swap discounts widen, fears of underworld grabbing kerb market

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ECONOMYNEXT – Upside down rates in Sri Lanka’s rupee dollar swap discounts continued to widen last week and market participants lamented the movement of higher share of kerb market foreign exchange to the underworld after a crackdown on authorized money changers.

In the official foreign exchange market swap discounts continued to widen, reflecting low rupee yields and low dollar availability for funding purposes, market participants said.

The spot/one month was quoted -170/-150 cents this week.

The spot two months was -325/-275 cents

The spot/three months was -500/-450 cents

The spot/six months was -800/-750 cents

A swap discount of 750 indicates that a market participants who sells dollars today at (say) 200 rupees in the swap market will get it back roughly for 192.50 (a discount) in six months, despite continued reserve losses indicating that the peg is under pressure.

The central bank has also forced dollar earnings of exporters and service providers to be converted, indicating that dollar deposit growth will slowdown further, hurting the funding books of banks, analysts warn.

Sri Lanka’s state banks had been among key borrowers in the swap market. State banks have large dollar loans to state-run CPC in particular.

The CPC had been forced to borrow dollars when the central bank printed money to target a call money rate in the past as well creating forex shortages. Attempts are underway to get credit lines and further expand dollar borrowings of the CPC.

This week the central bank raided several authorized money changers who have been exchanging dollars at above the official non-credible peg of 200 rupees to the US dollar.

Sri Lanka’s authorized money changers are mostly long standing businesses which have operated across generations. Many belong to the Tamil and Muslim communities.

The communities had been engaged in cross-border trade from the British period and beyond.

“Most of my business is going to the underworld,” a traditional kerb market merchant lamented earlier this week after the first raids of authorized money changers took place.

Hawala operators may also get additional business discouraging people from bringing notes to the country, another said.

There was also a possibility of forged dollar notes being circulated as the underworld expands the business, market participant warned.

Sri Lanka is a country where there was hardly any forged dollar notes due to the screening done by the longstanding kerb market community which included authorized money changers.

Though international card fraudsters targeted credit cards and ATMs in Sri Lanka forged dollar note operators could not target Sri Lanka due to the business practices of the domestic kerb market, those familiar with the practice say.

Forged foreign currency notes operators are active in countries like Indonesia.



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Landslide RED warnings issued to the Divisional Secretaries Divisions of Ududumbara, Nildadndahinna and Walapane

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The landslide early warning center of the National  Building Research Organisation [NBRO] has issued RED warnings to the districts of Kandy and Nuwara Eliya for the next 24 hours effective from 0900 hrs today [09th January].

Accordingly,
LEVEL III RED landslide early warnings have been issued to the Divisional Secretaries Divisions and surrounding areas of Ududumbara in the Kandy district, and Nildandahinna and Walapane in the Nuwara Eliya district.

LEVEL II AMBER landslide early warnings have been issued to the Divisional Secretaries Divisions and surrounding areas of Wilgamuwa in the Matale district, and Mathurata and Hanguranketha in the Nuwara Eliya district.

LEVEL I YELLOW landslide early warnings have been issued to the Divisional Secretaries Divisions and surrounding areas of Uva Paranagama, Welimada,  Kandaketiya, Badulla, Meegahakiwula, Hali_Ela, Passara and Lunugala in the Badulla district, Minipe in the Kandy district, Ambanganga Korale, Ukuwela, Rattota, Naula and Laggala_Pallegama in the Matale district, and Nuwara Eliya in the Nuwara Eliya district.

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A Policy is being formulated to ensure Child Protection in the use of Technology — Prime Minister

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Prime Minister Dr. Harini Amarasuriya stated that a policy is currently being formulated to ensure child protection in the use of technology.

The Prime Minister made this statement on Thursday (08) in Kandy while briefing the Most Venerable Mahanayake Theros of the Asgiriya and Malwathu Chapters on the issue that has arisen regarding the Grade 6 English module. Thereafter, printed copies of all modules were  presented to the Mahanayake Theros.

Earlier on Thursday  (08), the Prime Minister visited the Malwathu Viharaya in Kandy and met the Most Venerable Thibbatuwawe Sri Siddhartha Sumangala Nayaka Thero, the Mahanayake of the Malwathu Chapter, where she explained the error that had occurred in the first print run of the English module for Grade 6 .

The Mahanayake Theros emphasized that education is a sensitive subject and that such matters should be handled with greater sensitivity and proper oversight. They further advised that a formal investigation should be conducted and that education reforms should be carried forward in a systematic manner.

Subsequently, the Prime Minister visited the Asgiriya Maha Viharaya and met the Most Venerable Warakagoda Sri Gnanarathana Mahanayaka Thero of the Asgiriya Chapter, where she clarified the error related to the English module.

The Mahanayake Thero noted that education reforms are a timely necessity and should be implemented with due oversight and careful review and also pointed out that there are broader issues in Sri Lanka regarding the use of technology, which are evident in the manner in which modern tools such as AI technologies are being used on social media.

Clarifying the issue Prime Minister Dr. Harini Amarasuriya further stated,

“We have appointed a committee to look into this issue, and based on the recommendations of the National Institute of Education (NIE), steps were taken to remove the relevant lesson. In addition, all printed copies of the relevant module have been stamped, and no module has been distributed to schoolchildren. A formal investigation into this matter has been initiated by the Ministry, and a complaint has also been lodged with the Criminal Investigation Department.

At the same time, we are in the process of formulating a policy on child protection in the use of technology”.

Thereafter, addressing the media and responding to the’ questions raised by journalists, the Prime Minister stated:

“The Opposition is attempting to use this national task for their own political advantage. However, many in society have expressed their views on the issues that have arisen in a positive manner, with the objective of identifying and correcting mistakes. The government has decided to move forward with education reforms by recognizing the error that have occurred and rectifying them. We will take the no-confidence motion brought by the Opposition as an opportunity to further advance dialogue on education reforms”

The occasion was graced by the Most Venerable Anunayaka Thero of the Asgiriya Chapter, Venerable Narampanawe Ananda Nayaka Thero; Deputy Registrar of the Asgiriya Chapter, Venerable Muruddeniye Dhammarakkhita Thero; Deputy Registrar of the Malwathu Chapter, Venerable Mahawela Rathanapala Thero; Members of Parliament Thushari Jayasinghe and Thanura Dissanayake; Mayor of Kandy Chandrasiri Wijenayake; Secretary to the Ministry of Education Nalaka Kaluwewa; and Secretary to the Ceylon Teachers’ Union in Central Province D. D. Wimalaweera.

[Prime Minister’s Media Division]

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The deep depression to the South-east of Sri Lanka is likely to intensify in to a cyclonic storm during the next 24 hours

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Deep depression Track. (Source: RSMC)

A RED warning  for a deep depression to the South-east of Sri Lanka has been issued at 01.00 a.m. on 09 January 2026 for the period until 01.00 a.m. 10 January 2026 by the Natural Hazards Early Warning Centre, of the Department of Meteorology.

The deep depression in the Bay of Bengal to the southeast of Sri Lanka (At 01:00 a.m. on Jan 9th, 2026 located about 200 km East of Pottuvil) is very likely to intensify further and move west-northwestwards towards the coast of Sri Lanka between Pottuvil and Trincomalee in the evening today (9th January 2026.) The system is likely to intensify in to a cyclonic storm
during the next 24 hours.

Hence, showery, and windy condition over the island, particularly in the Northern, North-Central, Eastern, Uva and Central provinces is expected to enhance.

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