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US-Iran war, global exchange rates and Sri Lankan Rupee

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When the strait shuts:

In the early hours of February 28, 2026, the world changed. Joint United States and Israeli airstrikes on Iran, meticulously planned, devastatingly executed, killed Supreme Leader Ali Khamenei, destroyed large swathes of Iran’s nuclear infrastructure, and triggered the most consequential military confrontation in the Middle East since the Iraq War. What followed was not merely a regional conflict. It was an economic earthquake felt from the trading floors of New York to the fuel queues of Colombo.

We are going to examine how a war fought in the Persian Gulf rewrote exchange rates across the global economy, and why a small island in the Indian Ocean, still recovering from its own financial near-death experience four years ago, found itself once again staring into an economic abyss.

From Maximum Pressure to Maximum Destruction

On February 28, the strikes began. The operation was vast and transformative. Iran’s air defences were systematically destroyed. Its missile production facilities were crippled. And its political leadership was decapitated. In response, Tehran did something it had always threatened but never done: it closed the Strait of Hormuz.

That decision, to block the 21-mile-wide waterway through which approximately 20% of global oil supplies flow, set off a chain of economic consequences that no government, central bank, or multilateral institution had fully stress-tested for.

The Oil Shock and What It Did to Currency Markets

The numbers tell the story with stark clarity. Brent crude, which had been trading at $71.32 per barrel on February 27, jumped 8% to $77.24 in the first two trading days of the conflict. Within a week, following the declaration that the Strait was “closed,” WTI crude surged more than 35%, the biggest weekly gain since the futures contract began in 1983, ending the week at $90.90. Brent climbed 28% to $92.69 in the same period. By early March, Brent had surged past $120 per barrel. The International Energy Agency characterised it as the “largest supply disruption in the history of the global oil market.”

This was not merely an oil price story. Oil is the world’s most foundational commodity, priced in US dollars, embedded in the cost of virtually every manufactured good, agricultural product, and service. When oil prices surge by 45%, as they did between February and April 2026, the consequences ripple through exchange rates with a logic that is both mechanical and unforgiving.

For oil-importing emerging market currencies, the mathematics were brutal. When oil prices rise in dollars and a country pays for oil in dollars, there are two simultaneous pressures on the exchange rate. First, the country must acquire more dollars to pay for the same volume of imports, increasing demand for the greenback and putting downward pressure on the domestic currency. Second, higher oil prices widen the current account deficit, removing the trade-balance support that usually anchors currencies. This double blow struck Asian, African, and Latin American currencies with particular force. Gasoline prices rose in 106 countries in the three weeks following the start of the conflict. The European Central Bank postponed planned interest rate cuts, raised its inflation forecast, and cut its growth projections.

Oil exporters told a different story. The Gulf states, Saudi Arabia, the UAE, Kuwait, saw windfall revenues at the very moment their physical infrastructure was under threat. Iran’s strikes on Saudi Arabian oil refineries and energy facilities injected volatility into the already fractured GCC calculus: higher oil revenues on one hand, higher security costs and diplomatic complexity on the other.

The Ceasefire and Its Limits

After five weeks of fighting, Pakistan and China delivered a joint peace initiative on March 31, 2026. On April 7–8, the United States and Iran agreed to a two-week ceasefire, with Iran committing to reopen the Strait of Hormuz. Markets reacted with violent relief. The S&P 500 and Nasdaq surged 3–4% in futures markets overnight. Oil prices fell nearly 25% from their peak. Equities that had slid 8–12% from pre-conflict highs began recovering.

But the ceasefire was “relief, not resolution.” The Strait of Hormuz remained at just 5% of pre-conflict shipping traffic five weeks after the ceasefire announcement. Supply chains do not unsnarl overnight. On May 7, the United States conducted further airstrikes on military sites in southern Iran and Tehran following Iranian targeting of US warships. A memorandum of understanding, intended to bring the conflict to a formal end within 60 days, was announced by mediators on June 14, with signing set for June 19. As of this writing, the conflict has not been formally resolved and nuclear negotiations are expected to begin under the framework.

Goldman Sachs projected that under an adverse scenario, 10 weeks of disruption and infrastructure damage, Brent could peak at $160 per barrel before settling at $115 in the fourth quarter of 2026. Even the base case of $105–115 per barrel through mid-year represents a sustained energy shock with no parallel in the post-2008 global economy.

Sri Lanka: The Compound Vulnerability

Sri Lanka has a particular relationship with oil price shocks that is unlike almost any other country of its size. It imports 100% of its oil. Its domestic energy infrastructure is built almost entirely around petroleum products. Its foreign exchange reserves, rebuilt painstakingly from near-zero during the 2022 crisis to $6.46 billion by the time the NPP government assumed office, have since grown sluggishly reaching only $6.87 billion by early 2026, a modest gain that offered little buffer against a shock of this magnitude, remain thin relative to the country’s import requirements. And it routes the overwhelming majority of its oil imports through the Strait of Hormuz.

When that strait closed in March, 2026, Sri Lanka’s exposure was immediate, structural, and arithmetically severe. The fuel import bill jumped 74.7% year-on-year to US$630 million in March, 2026, alone. Reserves fell 3.8% to approximately $6.7 billion after the country spent $1.5 billion on fuel imports in the first four months of the year. Sri Lanka’s monthly storage capacity covers only one month of consumption, making it acutely vulnerable to supply disruptions that persist beyond a few weeks.

The exchange rate impact was direct and rapid. The Sri Lankan rupee, which had traded at approximately Rs. 300 to the US dollar at the start of 2026, fell sharply from early March. The currency tumbled 8.7% from its pre-conflict level within weeks. By late May 2026, commercial bank selling rates stood at approximately Rs. 334 per dollar, a 5.4% year-to-date depreciation against the greenback.

Every rupee of depreciation compounds the damage: a dollar-priced barrel of oil that cost Rs. 21,300 at Rs. 300/$ costs Rs. 23,700 at Rs. 334/$, before accounting for the price rise in the barrel itself.

The compounding of the exchange rate depreciation on top of the oil price surge created a fuel price crisis that has no precedent in the post-2022 recovery period. Petrol 92 at CEYPETCO stations, which stood at Rs. 293 per litre 12 weeks before, had risen to Rs. 434 per litre by late May, a 48% increase in the space of three months. The true import and distribution cost of diesel was approximately Rs. 750 per litre, requiring a government subsidy of Rs. 57 billion over a three-month period to keep pump prices at Rs. 407.

The Central Bank’s Painful Choice

The Central Bank of Sri Lanka faced the classic emerging market dilemma that oil shocks create: a currency under pressure from capital outflows and import costs, combined with inflation driven by energy prices, in a context where raising interest rates to defend the currency would choke off the economic recovery that the country had barely begun.

On May 26, 2026, the CBSL made its call. It raised the overnight policy rate by 100 basis points to 8.75%, its first monetary tightening in three years, and the largest single hike since the depths of the financial crisis in March 2023. Seven out of twelve economists polled by Reuters had predicted only a 25-basis-point move. The shock was deliberate: the CBSL was signalling that price stability had been elevated over growth promotion.

The consequences were immediate. The Colombo Stock Exchange fell 0.8% on the day of the announcement. Growth forecasts were cut, from 4.2% to 3.0% by at least one major equity research firm. The Central Bank Governor acknowledged that the 4–5% growth projection for 2026 was now achievable only “at the lower band.” Capital Economics observed that the rate hike “highlights the country’s vulnerability to the crisis in the Middle East, and is unlikely to be the last unless the crisis subsides soon.

More encouragingly, BMI (a Fitch Solutions unit) projected that the rupee could recover to Rs. 320 per dollar by year-end, on the assumption that the Iran war concludes by June and oil prices ease. An IMF board meeting was scheduled to approve a $700 million tranche to Sri Lanka under the ongoing $2.9 billion programme, a lifeline that, if disbursed, would provide critical reserve support.

The Broader Lesson

What the 2026 Iran war has demonstrated, with a clarity that no academic model can replicate, is that geopolitical shocks are not symmetric in their exchange rate effects. The same event that provides a windfall for oil exporters imposes a compound penalty on oil importers, and the penalty is largest for countries whose currencies are weakest, whose reserves are thinnest, whose import dependence is highest, and whose recovery from previous crises is most recent.

Sri Lanka is, in 2026, the canonical case study. It has done almost everything right since 2022: restructured its debt, rebuilt reserves, maintained an IMF programme, restored exchange rate stability, and begun recovering economically. None of that inoculated it against an exogenous shock of this magnitude. The rupee’s 8.7% fall from pre-conflict levels, the $1.5 billion fuel import bill in four months, the 100-basis-point emergency rate hike, these are the costs a small, import-dependent, oil-importing island economy pays when the world’s energy arteries are severed by war.

There is a policy lesson embedded in these numbers. Sri Lanka’s energy vulnerability, its total dependence on imported fossil fuels routed through a single geopolitical chokepoint, is not merely an economic problem. It is a national security problem. The Strait of Hormuz is not a permanent fixture of reliable global trade. The 2026 war has proven, at enormous cost, that it can be closed. Any serious national energy strategy must treat that closure not as a tail risk but as a planning scenario.

The hard work of diversifying energy sources, accelerating renewable capacity, building strategic petroleum reserves, and reducing the share of petroleum in the import bill is not merely desirable. Since February 28, 2026, it has become existential.

(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT, Malabe.
Views expressed in this article are personal.)



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Sections of US media looking power straight in the eye

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President Trump addressing the media at the White House.(BBC)

Some fundamental freedoms seen to be at the heart of democracy in the US – religion, speech, the press, assembly and the right to petition the government – are at risk of being undermined at present by the country’s Executive President. However, the latter is being legally challenged on this score by some sections of the US media and the citizenry of the country could take heart from this notable defense of media freedom.

In fact this is good news for the world of democracy. The push back is coming from organizations such as CNN, ABC, CBS, Fox, NBC who constitute the nucleus as it were of the US media and their solidarity no less than their resourcefulness calls for commendation.

Following a recent White House decision to suspend CNN from what was referred to as ‘participation in presidential pool coverages’, the other media organizations mentioned refused to replace it in the pool. Their position was that the public had a right to receive ‘accurate and independent information about the government.’

Earlier, the White House decided to bar MS NOW and Politico from entering its premises following the restrictions imposed on CNN. The organizations were accused of publishing “FAKE NEWS’ , ‘Fiction’ and ‘lies’ in respect of the administration. These organizations lost no time in initiating a federal lawsuit accusing the central administration of violating their rights guaranteed by the First Amendment.

However, the latter litigating organizations could now consider themselves as having been vindicated because the federal court hearing their case has ordered the Trump administration to temporarily restore White House press access to journalists from the mentioned media institutions. Notably, the court has declared that the ban is ‘likely unconstitutional’. The case is proceeding.

The mass media of the most vibrant democracies of the West ought to be no strangers to such inspirational acts of solidarity and exemplifications of independence but there are lessons here for the democracies of the South that could stand them in good stead. Minus the right of a people to be informed, the rest of fundamental rights featuring in Southern Bills of Rights and legislation of the kind are bereft of substance and meaning.

It is informed decision-making on the part of a citizenry that makes for democratic vibrancy and on this score many a Southern democracy fails. While Southern publics generally demand of their governments continuous economic well being and substantive material benefits they are not equally desirous of being informed and knowledgeable.

This lacuna in the consciousness of many Southern publics enables their governments ‘to get off the hook’, so to speak and govern, or more often misgovern, their countries with impunity. Among other factors, this species of mass ignorance makes it possible for governments to dismantle democracy and rule in perpetuity.

Accordingly, an educated and constantly informed public is an essential precondition for the flourishing of democracy and independent media are integral to this process. Minus an independent mass media sector that meets the knowledge needs of the people responsibly, democracy is as good as dead.

Needless to say, those sections of the US media that are currently taking the Trump administration to task over its media curbs are acutely aware of the cruciality of these fundamental knowledge requirements.

The hope of democratic opinion worldwide and locally is likely to be that media independence would thrive in the manner in which it is flourishing in the most vibrant and accountable democracies of the West.

Southern countries such as Sri Lanka that lay claim to democratic credentials, but are democracy-deficient in many ways, need to be particularly cognizant of these requirements. The publics of these countries need to go the extra mile to ensure the thriving of an independent but responsible mass media sector.

In fact it is veritably a matter of life and death. It is only an independent media sector that could, while ensuring the existence of an informed public, impress on the latter the need to protect and perpetuate its fundamental rights. In the absence of these campaigns, such publics could be eventually having on their hands governments that boast of ruling in perpetuity.

Taking a leaf from the sections of the US media referred to independent media organizations in Southern states need to act in solidarity as well. They would need to act on the basis of the principle that acts of victimization suffered by members in their fold at the hands of governments, for instance, are in fact inimical acts directed at their collectivity and which call for united remedial action. In short, no independent mass media institution could see itself as ‘an island’.

Besides some general guidance on the importance of media independence and solidarity, the message coming from the US with regard to media praxis is that power must be stood-up to unblinkingly. The mentioned sections of the US media are primarily in a struggle to ward off encroachments on their independence in the areas of policy and practice by the political executive, that is the President.

The latter would ride rough-shod over the media in the absence of robust opposition by the media itself to inimical executive action of this kind.

While media independence needs to be seen as crucial to democratic development, an obligation is cast on the media to ensure that it uses such independence responsibly and constructively.

The worst that could afflict a media sector is for it to fall prey to the clichetic ‘freedom of the wild ass’. In fact recurring irresponsibility on the part of the media could lend credence to the perception that a tightly regulated media is best for a country. It is a short step from this misguided view to the position that political authoritarianism is best for a state. That turn of events would be of course catastrophic for a democracy.

The issues discussed thus far point to the need for a broad discourse among Southern democracies in particular on what is best for them in this connection. Given the risks underscored earlier for Southern countries in particular a broad discussion on the matters at hand, which includes the public, emerges as a must for Sri Lanka. Besides, media solidarity within democratic countries and internationally is a must.

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What lessons can be learned to improve quality of Sri Lanka’s Grade 6 syllabus

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Prime Minister Dr. Harini Amarasuriya

by Prof. M. W. Amarasiri de Silva

Following public controversy over an inappropriate web link found in an English study module, the Sri Lankan government formally deferred the full rollout of the Grade 6 curriculum reforms to January 2027. In the interim, state schools will maintain the existing syllabus, reverting to standard eight-period daily timetables and previous textbooks to ensure uninterrupted instruction. Prime Minister and Minister of Education Dr. Harini Amarasuriya emphasized that this temporary pause allows the Education Ministry to thoroughly review all instructional materials, fix editorial flaws, and conduct scientific impact assessments across pilot schools prior to nation-wide implementation.

To address the oversight, an expert committee evaluated the flawed materials, completed necessary amendments, and finalised discussions to resubmit corrected modules for printing. Beyond revising written texts, the Ministry established a broader preparation roadmap—allocating funds for extensive teacher training programs set to begin mid-year, alongside scheduled informational briefings for parents, teachers, and students. Prime Minister Amarasuriya reaffirmed that none of the valid first-term modules were completely discarded or scrapped, preserving state resources while systematically rebuilding public trust and strengthening quality assurance protocols.

In this respect, this article reviews the current grade 6 syllabus comparing it with similar syllabi of India and the USA, with a view to make recommendations for the upcoming grade 6 syllabus revision.

Architecture of nation’s future

Education is the quiet architecture of a nation’s future. It is the unseen scaffolding upon which generations build their character, their intellect, and their capacity to contribute meaningfully to society. In Sri Lanka, the Grade 6 syllabus occupies a particularly important place in this architecture. It is the bridge between primary learning and the more demanding intellectual terrain of secondary education. It is the moment when children begin to move from learning basic facts to understanding concepts, from memorising information to applying knowledge, and from passive reception to active engagement. Yet, despite its importance, the Grade 6 curriculum in Sri Lanka has long struggled with issues of breadth, depth, relevance, and pedagogy. As global education systems evolve, Sri Lanka must examine what lessons can be learned from international models—particularly India and the United States—to strengthen its own curriculum and prepare students for a rapidly changing world.

The first lesson Sri Lanka can learn is the value of conceptual clarity. India’s NCERT curriculum, especially in Mathematics and Science, is globally respected for its logical progression and conceptual depth. Indian students are introduced early to the idea that mathematics is not merely a set of procedures but a language of reasoning. They learn why a ratio works, not just how to compute one. They understand the structure of an equation, not merely the steps to solve it. In Science, they explore the properties of materials, the structure of plants, and the principles of motion with a clarity that encourages curiosity rather than rote memorisation.

Sri Lanka’s Grade 6 syllabus, while competency-based, often leans heavily toward content coverage. Students are expected to learn many topics, but the time allocated for each is limited, and the teaching culture often emphasizes memorisation over understanding. If Sri Lanka wishes to improve the quality of its syllabus, it must embrace the idea that fewer topics taught well are better than many topics taught superficially. Conceptual mastery builds confidence, and confidence builds lifelong learners.

Lesson from the US

A second lesson comes from the United States, where the curriculum is built around skills rather than content. American students in Grade 6 are expected to read complex texts, analyse arguments, write essays supported by evidence, conduct experiments, and engage in collaborative projects. The emphasis is not on how much they know but on what they can do with what they know. This skills-based approach encourages critical thinking, creativity, and independence—qualities essential for success in the modern world.

Sri Lanka’s syllabus, by contrast, often rewards students for reproducing information rather than interpreting it. The exam culture reinforces this tendency, as students are assessed primarily through written tests that measure recall. To improve the syllabus, Sri Lanka must integrate more opportunities for students to think, question, debate, and create. The classroom should become a space where students learn to solve problems, not just memorize solutions.

Another important lesson comes from the breadth of Sri Lanka’s own curriculum. One of the strengths of the Sri Lankan system is its inclusion of cultural and religious education. Subjects such as Buddhism, Hinduism, Islam, and Christianity provide moral grounding and cultural identity. Art, Music, Drama, and Health contribute to holistic development. These subjects remind students that education is not merely about academic achievement but about becoming a balanced human being. However, breadth without depth can become burdensome. Grade 6 students in Sri Lanka often juggle more than ten subjects, each with its own textbook, competencies, and assessments. This creates pressure not only for students but also for teachers, who must rush through content to meet syllabus requirements. The lesson here is not to reduce cultural subjects but to integrate them more meaningfully. Religious education can be taught through ethical discussions, community projects, and reflective writing. Art and Music can be connected to history, literature, and social studies. Health can be linked to science and physical education. Integration reduces overload while enriching learning.

Another lesson from India

India offers another valuable lesson in the form of standardised textbooks. NCERT books are used across the country, ensuring consistency in quality and content. They are written by subject experts, reviewed rigorously, and updated periodically. Sri Lanka’s textbooks, while generally well-structured, vary in quality and often lag behind modern pedagogical standards. Some are dense, text-heavy, and lacking in visual aids or real-world examples. To improve the syllabus, Sri Lanka must invest in high-quality textbooks that are engaging, accessible, and aligned with contemporary educational research. Textbooks should not merely transmit information; they should inspire curiosity. They should include stories, diagrams, experiments, and activities that make learning enjoyable and meaningful.

The United States provides a lesson in inquiry-based science education. American students conduct experiments, build models, observe natural phenomena, and engage in engineering design challenges. They learn science not as a set of facts but as a process of discovery. Sri Lanka’s science curriculum includes experiments, but many schools lack the resources, laboratory facilities, or teacher training to implement them effectively. Improving the syllabus requires improving the ecosystem around it. Schools need laboratories, equipment, and teacher development programs that empower educators to teach science through inquiry. A syllabus is only as strong as the environment in which it is taught. ***

International models

Another area where Sri Lanka can learn from international models is language education. In India, students often learn three languages—English, Hindi, and Sanskrit or Urdu. This heavy language load has its challenges, but it also produces students with strong linguistic skills. In the United States, English Language Arts emphasises reading complex texts, writing arguments, and analysing literature. Sri Lanka’s English curriculum, while improving, still struggles with uneven implementation across schools. Many students reach secondary school without adequate proficiency in English, limiting their access to global knowledge. To improve the syllabus, Sri Lanka must strengthen English instruction through better teacher training, more reading opportunities, and a shift from grammar-heavy teaching to communication-focused learning. At the same time, Sinhala and Tamil instruction should be modernised to include creative writing, literature appreciation, and critical reading.

Social Studies is another area ripe for improvement. Sri Lanka’s curriculum includes History, Geography, and Civics, but the teaching often emphasises memorization of dates, definitions, and facts. India’s Social Science curriculum, while also content-heavy, provides clearer conceptual frameworks. The United States, however, excels in teaching civics and citizenship. American students learn how governments function, how laws are made, how communities solve problems, and how citizens participate in democracy. Sri Lanka can strengthen its Civics curriculum by incorporating more discussions on governance, rights, responsibilities, and community engagement. Students should learn not only the structure of government but also the values that sustain it—justice, equality, and participation.

One of the most important lessons Sri Lanka can learn is the value of reducing exam pressure. In both India and Sri Lanka, exams dominate the educational landscape. Students are judged primarily by their ability to perform on written tests. The United States, while not free from assessment challenges, uses a wider range of evaluation methods—projects, presentations, portfolios, and continuous assessment. These methods allow students to demonstrate learning in diverse ways. Sri Lanka should consider adopting a more balanced assessment system that values creativity, collaboration, and practical skills alongside academic knowledge.

Technology integration is another area where Sri Lanka can improve. The United States incorporates digital literacy, coding, online research, and digital citizenship into the curriculum. Sri Lanka’s ICT syllabus is well-structured, but implementation varies widely. Many schools lack computers, internet access, or trained ICT teachers. Improving the syllabus requires improving infrastructure. Students must learn to navigate the digital world safely and effectively. They must learn coding not as a luxury but as a basic skill. They must learn to evaluate online information critically, a skill essential in an era of misinformation.

Teacher training

Teacher training is perhaps the most critical lesson of all. A syllabus is only as effective as the teachers who deliver it. India invests heavily in teacher training through national programs, workshops, and online platforms. The United States emphasises professional development, peer collaboration, and instructional coaching. Sri Lanka must strengthen its teacher training programmes, ensuring that educators understand not only what to teach but how to teach it. Teachers should be trained in inquiry-based learning, differentiated instruction, formative assessment, and classroom management. They should be empowered to adapt the syllabus to the needs of their students rather than follow it mechanically.

Sri Lanka must learn the lesson of relevance. A syllabus must prepare students not only for exams but for life. It must teach them how to think, how to communicate, how to solve problems, and how to work with others. It must prepare them for a world where knowledge is abundant, but wisdom is scarce. It must help them navigate a future shaped by technology, globalisation, environmental challenges, and social change. To improve the syllabus, Sri Lanka must ask: What kind of citizens do we want to produce? What kind of thinkers? What kind of leaders? The answers to these questions should shape the curriculum.

Lastly, improving the quality of Sri Lanka’s Grade 6 syllabus requires learning from both international models and local strengths. From India, Sri Lanka can learn the value of conceptual clarity and standardised textbooks. From the United States, it can learn the importance of skills, inquiry, and creativity. From its own traditions, it can preserve cultural education, moral development, and holistic learning. The goal is not to copy another country’s system but to build a uniquely Sri Lankan curriculum that is modern, relevant, and empowering. A curriculum that honours the past while preparing students for the future. A curriculum that nurtures thinkers, creators, and compassionate citizens. A curriculum worthy of a nation with immense potential and a proud educational heritage. If Sri Lanka embraces these lessons, the Grade 6 syllabus can become not just a bridge to secondary education but a foundation for national progress.

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Three magical nights at Colombo Fashion Week

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Melloney Dassanayaka is certainly a familiar name here, and abroad, as well, having represented Sri Lanka at the Miss Universe 2024 pageant, held in Mexico.

A former National Basketball player, she is also involved in several projects, beneficial to the community, including financial literacy for single women-headed families in the country.

A banker by profession, Melloney hold a Bachelor’s Degree in Business Administration.

Melloney with Asanka de Mel of Lovi Sri Lanka

This extremely talented old girl of Holy Family Convent, Bambalapitiya, was in the limelight, once more, when she was seen on the ramp at Colombo Fashion Week.

It was her very first experience, at this prestigious event, and she loved every minute of it, she said, and, what’s more, she was featured on three consecutive days.

According to the itinerary, on day 01 she walked for Lovi Sri Lanka; day 02 Rizwan Beyg (Pakistan designer), Arsath Furkhan (Indian designer), Haoyi Yan (Chinese designer) and Samant Chauhan (Indian designer); and on day 03 Vaishali Shandangule (Indian designer).

In today’s edition of The Island SceneAround, we spotlight Melloney, on the ramp, at Colombo Fashion Week.

Melloney will also participate at Miss Grand All Stars to be held later in the year, in Thailand, as Miss Universe Sri Lanka 2024.

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