Features
Fixing the dollar exchange rate: A major mistake

by Romesh Dias Bandaranaike, Ph.D.
Until September last year the US Dollar (USD) – Sri Lanka Rupee (SLR) exchange rate was determined on the basis of a “managed float.” This meant that demand and supply of USD in the market were the primary determinants of the exchange rate. Official (Central Bank) market intervention, by way of sale or purchase of USD in limited quantities, smoothed out any large fluctuations in the exchange rate, when needed.
In September 2021 the Central Bank (CB) set an upper limit of SLR 203 per USD that authorized dealers in foreign exchange, including banks, must adhere to for all foreign exchange transactions. This restriction, now in effect for five months, has had severe adverse impacts on the functioning of the Sri Lankan economy.
Since the demand for USDs has been higher than the supply of USDs at the upper limit of SLR 203 per USD, the CB restriction essentially results in the exchange rate being “fixed” at this rate. Banks have been compelled to address this shortage, by restricting allocation of their inadequate USDs among customers for all permitted foreign expenditures, at this “fixed” rate. The shortage has worsened substantially over the past months. In response, the CB, while stubbornly maintaining the “fixed” rate, has issued a number of additional directives, which have failed to address the adverse consequences of this shortage, as detailed below.
When the demand for a foreign currency exceeds its supply in any country, the fixed official exchange rate does not allow market adjustment to reflect that difference. The natural consequence is the emergence of an alternative market for the currency in shortage, commonly termed a “black market.” Such a black market has recently developed in Sri Lanka with USDs “selling” in excess of SLR 240 per USD compared with the “official” rate of SLR 203.
Migrant Remittances: Sri Lanka’s single largest source of USDs are remittances from migrant workers abroad, primarily in the Middle East. Informal currency transfer arrangements for workers in the Middle East from many South Asian countries (Pakistan, Bangladesh, Nepal, etc.) have been in place for decades, since many such workers did not have bank accounts in their home countries. These arrangements, termed “Hawala” and “Undiyal” are very reliable. Workers hand over foreign currency in the country where they work and the designated person in the home country is given the money in local currency at the agreed exchange rate.
In the past, most Sri Lankan workers did not resort to such arrangements because they had bank accounts in Sri Lanka to which they transferred their foreign earnings at a realistic official exchange rate. With the recent significant price difference between the official and black market rates for the USD, the Hawala/Undiyal arrangements have provided a ready alternate avenue for Sri Lankan workers. As more of these workers became aware of the alternate option, remittances through the banking system have declined precipitously, from USD 600-700 million per month, to USD 200-300 million per month.
The CB tried to reduce this decline by initially offering SLR 2 per USD over the “official” rate for worker remittances, and later an additional SLR 8 per USD. When remittances declined further, the Central Bank tried to “threaten” workers by saying that using alternate methods were illegal and may even be funding “drug dealing.” In November 2021, foreign worker remittances through official channels had declined by USD 340 million compared with November 2020. While the official exchange rate remains misaligned to market demand and supply, this loss will only increase as more workers become aware of alternate avenues. The adverse impact on Sri Lanka’s foreign exchange earnings will be a staggering USD 4 billion per year. This alone should be reason enough to dispense with the “fixing” of the exchange rate.
Export Earnings: With the fixing of exchange rates, exporters have been delaying the repatriation of their export earnings for as long as possible, till the CB is finally forced to succumb to the pressure and let the currency float. The CB has introduced more and more regulations to push exporters to bring back these funds to Sri Lanka and mandatorily convert portions of these amounts to SLRs. Despite all CB regulations, the USDs officially coming into the country from exports is less than if the currency was allowed to find the level at which supply and demand balance.
Tourist Earnings: With better control of the Covid-19 pandemic, tourist numbers have increased substantially in December and January, though not to pre-pandemic levels. When it became apparent that tourists too were converting their foreign currencies into SLRs in the black market, the CB required tourists to pay their bills at all registered tourist hotels and guest houses in foreign currency. The attractiveness of Sri Lanka as a tourist destination depends on the costs incurred by tourists in their own currencies. If they officially receive less SLRs for their currencies than with a realistic exchange rate, this will discourage some fraction of tourists from visiting Sri Lanka, which, in turn, will reduce tourist foreign currency inflows.
Shipping and Airlines: As a result of the severe USD shortage, banks are restricting foreign exchange for local agents of shipping and airlines who seek foreign exchange to pay their principals for services provided, after collecting payments in SLRs from clients. Kuwait Airways has already stopped its flights to Sri Lanka. Others will also reduce flights if not paid for tickets sold or goods air freighted. Shipping lines will soon by-pass Sri Lanka as a destination if not paid for their services. The country will face severe economic repercussions from these trends.
Foreign Investments: The Colombo Stock Exchange indices have grown significantly over the past year, totally on the back of local investors. Foreign investors have been very large net sellers. The original foreign investments were made on condition that the foreign investors could freely convert revenue from sale of shares and from dividends back to the currencies they originally brought in for investments. These sellers now face difficulty when trying to remit their sales proceeds in foreign currencies, because of the shortage. One can only imagine the negative impact this will have on investor confidence and any potential new investments.
“Illusory” Benefit: The most often cited “benefit” of fixing the exchange rate at an artificially low rate is that this would control price increases in imported food and other consumer items. This is an illusion. Many importers can only obtain foreign exchange to import such items in the black market. The rates paid for such exchange is further increased beyond the open market rate because of another CB regulation (see below). When importers persuade banks to open LCs for imports and the banks are late in meeting their obligation to pay the LCs after the goods have arrived in the Port, importers incur large demurrage costs. This increases the final consumer price, even if the LC is paid for at the official exchange rate.
Foreign Currency Grab by CB: The CB has introduced a regulation in terms of which any bank which converts SLRs to foreign currency for one of its clients must give the CB foreign currency equivalent to 25% of the converted amount at the official rate. An importer desperate to obtain foreign exchange for any critical need, such as urgent spares to repair machinery, arranges to pay an exporter having USD a premium above the official rate, if the exporter agrees to bring in USD into the exporter’s local bank at the official rate. The importer then asks the same local bank to open an LC on his behalf and use the funds he has arranged for (although it is brought into the exporter’s account) to pay for the urgent import. Because of the CB’s 25% regulation, the bank typically asks the importer to arrange for an extra 25% beyond the LC amount. This effectively means that instead of paying a premium of SLR 37 (say) over SLR 203, it costs the importer a further 25% (SLR 9.25) per USD to fund his LC. In essence, the CB is now asking importers desperate for foreign exchange to purchase an additional 25% on behalf of the CB and to meet the cost of the premium; effectively a “black market” deal on behalf of the CB!
The CB has also, by decree, forced private banks to allocate a share of their limited foreign exchange for the import of fuel, for vehicles and for operating the CEB’s thermal power plants. LCs for such imports were previously opened through the two state banks, which no longer have sufficient funds for this purpose, because of the fixed exchange rate. This has further reduced the foreign exchange available to private banks to service their own customers.
It is abundantly clear to any person with a modicum of sense, although clearly not to the Central Bank, that its attempts to artificially control the exchange rate by diktat is having a massive adverse impact on the functioning of the economy, without any worthwhile offsetting benefits. Will the CB ever come to its senses and let the USD find its true rate to save the country from further misery?
[The author is an economist with extensive experience at CEO level, in both public and private sectors.]
Features
Shame! Ragging raises its cowardly head again

Ragging at Sabaragamuwa university has resulted in the loss of another student’s life and there is another incident of barbaric attack on an anti-rag student of J’pura university by some students from the same university. Whether the bullies are backed by political parties or not, they show their undeveloped and conformist minds that need urgent refinement; if they are connected to political parties and student unions, the latter show only their vulgarity and duplicity when they wax eloquent about modern education, culture, decadent politics, human rights, corruption and all that jazz. That this barbarous practice continues in broad daylight and under the very nose of university and law enforcement authorities is deplorable and puzzling to say the least. It is ironic that the best minds, the superstars in academia, the leading lights in education and the guardians of all that is progressive have become helpless spectators of this bullying happening in their universities. The ignominious records of rag victims in our country are a crying shame as all those perpetrators have been from that somewhat musty and largely conservative ‘cream of intelligence’ as they are called at all inauguration ceremonies where their egos are pampered.
Ragging in our universities is a sure sign of the backwardness of our culture and education, in comparison with that of civilized societies. The brutal practice of ragging shows that education in our country, both in schools and universities, has a lot of room for improvement about making the undergraduate population sensitive and sensible, more than ‘educated’. Of course, we can understand torture if it is something which happens in the underworld or in any place where the new recruits must be brutaliesed before they are admitted to their circles, but how can one understand when it happens in the highest seats of academia? Professor O. A. Ileperuma has, in his article “Ragging and loss of life” published in The Island of 5 May 2025, stated that some academics turn a blind eye to ragging perhaps “because they themselves were raggers in the past and see nothing harmful in such sordid instances of ragging”. This is pathetic and may perhaps prove some of the accusations that have been made ad nauseum about the lack of a wholesome education in our university system, which is said to be obsessed with mass producing ‘employable graduates’.
As they say, desperate times call for desperate measures. As far as the ragging culture in our universities is concerned, desperate measures are long overdue. In the highest institutes of learning where knowledge is produced and all the progressive and advanced ideas are supposed to be generated, there has been unfathomable brutality, crudeness and conventionality in the name of an acquired beastliness which they call ‘ragging’ to give it a quasi-academic smell when all it amounts to is lack of refinement which can be linked to numerous reasons.
Most of the culprits are the victims of a system which esteems hierarchy where it is accepted that superiority is synonymous with repressive power and inferiority is another term for meekness and passive acceptance of all commands coming from above. It is a mentality which is based on the warped logic that superiority is absurd if the seniors have no right to snub the juniors. Those who have tasted humiliation in one form or another for long due to reasons inherent in society can grow up to be vengeful. Most of these diehard raggers often show signs of this mentality in the way they behave the minute they have been automatically lifted to their pathetic superiority after one year in the university where they enjoy a mistaken sense of immunity from the law. The widely publicised idea of ‘freedom’ associated with universities and their relative aloofness from the rest of society and the aura they have acquired have made them safe havens for the raggers if the unmitigated brutality in ragging over the long years is any indication. The question is why (oh why?) these learned bullies despise civilised behaviour so much in their enclaves of power merely on the strength of one year’s seniority. If it is their one year’s accumulated knowledge which makes them feel superior to the newcomers in an aggressive way, surely, such knowledge is questionable, which must intrigue educationists, psychologists, sociologists and all academics interested in the role of education in character building.
Raggers have been saying ad nauseam that ragging is given to make the new entrants tough enough for academic work. As we know their methods include using foul language, humiliation, intimidation, physical and psychological abuse, torture, beating and forcing rigorous exercises even leading to death. The resultant trauma has led some to commit suicide. All this is done to help the new students with a proven capacity for hard work in the academic field!
However, there are some pertinent questions to be asked. Is this method of building resilience of potential academics backed by research? Should this ‘programme’ be conducted by senior students (who are apparently mentally unsound)? Aren’t there better qualified people to conduct a civilised programme which would help make the newcomers ready to face the trials of academic life? Do they believe that no refined programme can be as ‘effective’ as their ragging? Why should they spend their valuable time doing it when it can be done by experts in a more organised and civilised manner? Have they ever been cultured enough to discuss this so-called ‘personality development’ programme with the relevant authorities and academics, with any reliable evidence to prove its effectiveness?
As we know, these raggers who are self-appointed ‘experts’ in character building of sorts expect total submission from the juniors they try to brutalise, and those who dare resist this bullying are viciously suppressed. To what extent does this compulsory compliance expected from the new students at the beginning of their academic career help them to be better undergrads?
How much more brutality in ragging is to be endured by the new university entrants for “desperate measures” to be called for?
by Susantha Hewa
Features
80th Anniversary of Second World War

One of the most important dates in World War II, is May 9, 1945, when the Soviet red flag with the hammer and sickle emblem was raised over the Reichstag building, the German parliament. This confirmed Germany’s unconditional surrender to the Soviet Union. Since then, 80 years have passed upto May 9, 2025. It is very timely to look back on the past 80 years of history, and to briefly discuss some of the current issues and the future.
Beginning and End of the 2nd World War
World War II began on September 1, 1939, when Nazi Germany attacked Poland. Within a year of the war, the world’s imperialist powers had divided into two camps. Germany was on one side, targeting Europe, Italy Africa, and Japan Asia, while Great Britain, the United States, and France were on the other side of the war.
Within a short time from the start of the war, Germany had conquered many countries in Europe, and on June 22, 1941, Nazi Germany attacked the Soviet Union. The Soviet Union joined the anti- Nazi Allies and launched the “Great Patriotic War” to defend the world’s first socialist state, and progressive forces around the world acted in a way that supported the Soviet Union.
Three major battles known as the Battles of Moscow, Stalingrad, and Kursk turned the tide of World War II, shattering Hitler’s dream of capturing Moscow in a few months (4 months) through Operation “Barbarossa” and celebrating the victory from Red Square. By the beginning of 1945, the entire Soviet Union had been liberated from Nazi Germany, and by March 1945, the Soviet Red Army had surrounded Berlin from the east, south, and north, and then surrounded the entire city, surrendering the German forces, ending the European War of World War II on May 9.
World War II was a major war in which 61 countries, representing 89% of the world’s population participated, and the total number of deaths in this war was 50 million, of which 25-30 million were Soviet citizens. The Soviet Red Army, which ended the Great War for the Liberation of Europe on May 9, 1945, entered the Battle of Manchuria three months later on August 9, 1945, and defeated imperialist Japan. By then, the United States had dropped atomic bombs on Hiroshima and Nagasaki (on August 6 and 9). Thus, the Soviet Union played the major role in defeating the fascist military coalition, including Nazi Germany, during World War II.
Post-World War order
Negotiations, to shape the post-war world order, began while World War II was still ongoing. In talks held in Washington in January-February 1942, in Canada in 1943, later in Moscow, and in Tehran, Iran in November-December 1943, the Soviet Union, the United States, Great Britain, and China agreed to establish an international organisation with the aim of preserving world peace. Later, the Soviet, American and British leaders who met in Yalta in Crimea agreed on the structure of the United Nations, the Security Council, and the veto power, and the United Nations Charter, signed by 50 countries in San Francisco in 1945, came into force on October 24, 1945.
Rise of Socialist world and collapse of colonialism
With the Soviet victory in World War II, the world underwent unprecedented changes. Although Mongolia was the only socialist state other than the Soviet Union at the start of World War II, after that war, Czechoslovakia, Poland, Romania, Bulgaria, Hungary, Yugoslavia, and Albania in Eastern Europe also became socialist countries. The Democratic Republic of Vietnam was established in 1945, and in 1947 a socialist state was established in East Germany under the name of the German Democratic Republic. The Chinese Revolution triumphed in 1949, and the Cuban Revolution triumphed in 1959. Thus, the socialist system established in a single country by the October Revolution in 1917 developed into a world system against the backdrop of the unique victory of the Soviet Union in World War II.
Another direct result of the victory in World War II was the collapse of the colonial system. National liberation struggles intensified in Asia, Africa and Latin America, and new independent countries emerged one after another on these continents. In the 25-30 years that followed the end of World War II, the colonial system almost completely collapsed. The United Nations, which began with 50 member states, now has 193 members.
With the end of World War II, working class struggles intensified. Communist parties were formed all over the world. Although the Sri Lankan working people’s movement was in a state of truce during World War II, the war ended in May 1945 and by August it had gone on a general strike. The 8-hour workday, wage boards, holiday systems and monthly salary systems were won through that struggle. The working class movement in this country was able to win many rights, including pension rights, overtime pay, and other rights, through the general strike held in 1946. Although the general strike of 1947 was suppressed, there is no doubt that the British government was shocked by this great struggle. In the elections held in 1947, leftist and progressive groups were elected to parliament in large numbers, and independence with Dominion status was achieved in 1948.
World is in turmoil
Until this era, which is 80 years after the end of World War II, the world has so far managed to prevent another world war. Although there have been no world wars, there have been several major conflicts around the world. The ongoing Middle East conflict over the forced displacement of the Palestinian people, the conflict created by Western powers around Iran, the Russia-Ukraine conflict, and the recently escalating Indo-Pakistan conflict are among them. The limited military operation launched by Russia to prevent the NATO organization reaching its borders, has transformed into a battle between Russia and the collective West. But the conflict now seems to have entered a certain path of resolution.
Several parties have launched trade wars that are destabilising the world, perhaps even escalating into a state of war. Thousands of trade sanctions have been imposed against Russia, and the US President has declared a trade war by imposing tariffs on dozens of countries around the world.
Meanwhile, the world has not yet been able to provide a satisfactory solution to the problem of global warming, which has threatened the existence of the entire human race.
The Bretton Woods Organizations (International Monetary Fund and World Bank), which were economic operating institutions established after World War II, have not only failed to lead the world’s economic development, but there is a strong allegation that the guidance of those institutions has exacerbated the economic problems of newly independent countries.
At this time of commemoration of the 80th anniversary of World War II, it is our responsibility to resolve the above problems facing the people of the world and to dedicate ourselves to the future of humanity.
Way forward
Accordingly, a futuristic, new economic order is emerging, and a multipolar world has been formed. The most important point to emphasise here is that the world order that was established after World War II, which encompasses various fields, is a system jointly developed by the great powers that won that war, and the reforms that need to be made in accordance with the demands to change this world order to suit the current reality must be identified collectively. No single country can change these world structures.
People are rallying all over the world for issues related to the survival of the entire human race, such as controlling global warming. New programmes that contribute to the economic development of most countries in the world have been or are being developed. The New Silk Road projects, the BRICS organisation, the New Development Bank, the Asian Infrastructure Investment Bank, and the Shanghai Cooperation Organization are such programs/new institutions. A global process has been launched to prevent a nuclear war and maintain world peace.
Many of the above-mentioned issues and problems have arisen through imperialist military and economic planning and operations, and therefore, the contradiction between imperialism and the people has become the main contradiction of this era. Therefore, it must be emphasized on the 80th anniversary of the Second World War that the way forward in the world will be through the people’s struggle against imperialism.
by Dr. G. Weerasinghe
General Secretary, Communist
Party of Sri Lanka
Features
New Mayors; 80th Anniversary of VE Day; Prince Harry missteps yet again

This week’s Cry is put together as the voting goes on for mayors of Municipal Councils. Cass is rather confused about this second tier of government, so she googled and here is what she got: “There are currently 29 municipal councils in Sri Lanka. These councils govern the largest cities and first tier municipalities in the country. The local government system also includes 36 urban councils and 276 Pradeshiya Sabhas.” Not that this has made matters clearer to Cass.
She believes that for a small country of 22 m people, we are too heavily governed from above, with a central government and then all these councils and sabhas below. Consider the number employed in them; most underworked and underworking. Another matter is that if you want a matter seen to, regarding property rates, etc., you are most often sent from this Sabha to that council.
This came about with the 13th Amendment to the Sri Lanka Constitution introduced on November 14, 1987, following the Indo-Sri Lanka Accord, which aimed to address the ethnic conflict by granting some autonomy to provincial councils. As Cass believes it was imposed on us by India after the threat expressed by India, instigated by Tamil Nadu, when Prabhakaran in his military childhood, was cornered and almost captured in Vadamarachchi.
India rained parippu on the northern peninsular, demanded no arrests of LTTE; and it was rumoured Indian forces were poised on the southern and south eastern coasts of the subcontinent ready to sail to war to the island below them. PM Rajiv Gandhi came instead; Prez JRJ was constrained to meet, greet and honour him. One rating in a guard of honour which handsome Rajiv inspected, expressed the majority people’s opinion; “We don’t want you here!” After which guards of honour worldwide are kept strictly at a safe distance from the VVIP honoured.
To Cass the most important fact of the election progressing now and its outcome is that she hopes newly elected mayors will insist on the Municipal Councils’ employees doing the work allotted to them: mostly garbage collectors; sprayers against mosquitoes; PHIs inspecting kitchens of eating houses and those in charge of general cleanliness of cities keeping s clean.
Complaints are numerous that roads are dirty, garbage piled up and drains and small waterways clogged so water remains stagnant and thus the rapid spread of most debilitating chikungunya.
May 8 1945 – VE Day
This date marked Victory in Europe. “… after Britain and its allies formally accepted Nazi Germany’s surrender after almost six years of war. At 15.00, the then Prime Minister Winston Churchill announced World War Two in Europe had come to an end.” Allied Forces marched into Germany from west and South and the Russians entered from the north. Hitler committed suicide and the Nazi so far invincible forces were shattered, battered and splintered. It was Emperor Hirohito who surrendered Japan and himself on August 15, 1945, after the Hiroshima and Nagasaki bombings (Aug 6,9).
Thus, this year is the 80th anniversary of the end of World War II and Britain brought out its Palace Guards, forces and cheering crowds to celebrate the event, and more to pay homage to veterans still living and extend gratitude to those soldiers, sailors and airmen and women who laid down their lives to save their country. King Charles III was present in a special seating area which had other members of the royal family; politicians and veterans and their families, while some of those who had served in the war rode in open cars to the cheers of the spectators.
The Netherlands and Canada too mounted celebrations. Canada made it a point to pay allegiance to the British Monarch as their head, and Cass feels sure King Charles III reciprocated with acknowledgement. Commented on were video statements Cass heard that this reiteration was for the benefit of Prez Trump with his plans to annex Canada as the 51st State of the US.
Prince of groans and complaints
In the midst of this pageantry and show of British royal family’s unity was Prince Harry cutting a very poor figure of himself, most in an interview given to the BBC after he lost his British Court of Appeal challenge over his security arrangements. “The Duke of Essex, who attended both days of the hearing at the Royal Courts of Justice last month, was appealing a ruling dismissing his challenge to the level of police protection he receives in the UK” He was demanding armed security for himself and his family if and when they visit England. This was refused because of his own withdrawal from royal duties, opting not to be a working member of the British Royal Family; and moving to the US to live. Videos Cass watched tore him to pieces on several counts. He said he could not bring his wife and children to Britain. He said he wanted reconciliation but his father would not speak with him. Then the blunder of adding the sentiment that King Charles’ days on earth were numbered. “We don’t know how long he has to live.”
He was very annoyed with a compere of a British late-night show for referring to him as Harry with no Prince or Duke salutation. He and his wife are not allowed to use HRH by King Charles’ orders, but it was said Meghan loves using the title. Here is a straightforward case of wanting and not wanting something, of utter selfishness and gross grasping.
Local news in English
Cass bemoans the fact she is no longer able to watch MTV News First at 6.30 of a morning. MTV late news in English is at 9.00 pm but it was repeated the next morning. Served lots, I am sure. In Cass’ case the TV set is monopolised by the two helpers she has with her. They watch teledramas on various channels all through the late evening almost to midnight. Can she butt in? Never! They need entertainment. So, no local news for her these days until she goes to another TV channel for news in English – few available. She hopes TV One will resume its news relay in English at 6.30 am after the welcome chanting of pirith.
Cassandra wishes everyone and our much-loved country a continuation of the peace of Vesak. Oneness of the people as good persons was demonstrated in the crowds in Kandy recently. Mosques opened their doors wide to let in anyone and everyone come in and sleep. All races supplied food and water. Such unity was not seen before. A propitious sign for the future.
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