Features
Harmonising CBSL’s pragmatism with long-term structural freedom
Beyond the Forex Crossfire:
“The emergency measures of today have a way of becoming the permanent institutional arrangements of tomorrow, unless we actively dismantle them.” — Friedrich Hayek (Nobel Prize-winning Economist & Author of ‘The Road to Serfdom’)
Introduction: The Anatomy of a Dual Narrative
Parliament recently witnessed a fierce macroeconomic clash over the Central Bank of Sri Lanka’s (CBSL) latest Extraordinary Gazette, which accelerated the mandatory conversion of residual export proceeds by the 10th day of the following month. Main Opposition MP Dr. Harsha de Silva vehemently challenged the rationale, questioning whether Sri Lanka was declaring a psychological return to the “crisis era” of 2022–2024.
Almost instantly, the financial markets responded: the Sri Lankan Rupee (LKR) strengthened sharply against the US Dollar, bouncing back to roughly Rs. 330. To the average observer, this creates a profound paradox. How can a policy be criticised as “draconian” and “anti-business” yet yield immediate, positive numerical results? The answer lies in a deep analytical blind spot that dominates public perception. My view is that the public is being forced to choose between two valid, yet seemingly contradictory, economic realities. In short, this article introduces a clear theoretical framework—”Macro-Structuralism vs. Micro-Pragmatism”—to establish new economic knowledge and elevate the conversation above routine political mudslinging.
The Public Blind Spot: Why the Majority Misunderstands the Debate
The fundamental reason the wider public struggles to comprehend this debate is that macroeconomic communication in Sri Lanka is routinely reduced to binary political theater. One side celebrates a strengthening rupee as an absolute victory; the other side decries capital controls as an absolute failure.
In reality, the public fails to recognise that the CBSL and its critics are looking at two different halves of the exact same coin:
· The CBSL operates in the immediate present, focusing on micro-market mechanics to prevent speculative currency hoarding.
· The Opposition focuses on the future, prioritising structural reputation, investor predictability, and international market signals.
Without an analytical framework that links these two perspectives, the public views the issue as a mere partisan disagreement, rather than a sophisticated technical trade-off between short-term stabilisation and long-term economic development.
Micro-Pragmatism: The Financial Justification for CBSL’s Directive
From a technical central banking perspective, the CBSL’s intervention was not only justified but textually necessary. As expectations of rising dollar demand grew—fuelled by discussions surrounding vehicle import liberalisations—exporters began acting as rational corporate agents. Anticipating a potential depreciation of the rupee, they held onto their foreign currency cushions.
This behaviour, while commercially logical for individual firms, triggers a collective crisis: it starves the domestic market of dollar liquidity, creating an artificial shortage that forces the rupee down. When “moral suasion”—informal requests and agreements with commercial banks—fails to change corporate behaviour, the Central Bank must utilise its statutory power. By implementing a strict legal timeline, the CBSL shattered the speculative loop, forced hoarded liquidity back into the banking system, and protected the domestic economy from an inflationary currency shock.
Macro-Structuralism: The Core of the Opposition’s Critique
Conversely, Dr. Harsha de Silva’s critique carries significant weight when viewed through the lens of long-term investment attraction. His argument is built on Macro-Structuralism: the idea that a nation’s regulatory reputation dictates its future growth trajectory.
In my view, forced conversion rules are indisputably crisis-management tools. When an economy enters a normalisation phase, continuing to deploy emergency administrative mandates signals to the global capital market that the domestic financial ecosystem remains fragile and unpredictable. If exporters feel their residual profits are subject to abrupt state appropriation, it introduces policy risk. The long-term danger is (i) capital flight (ii) businesses may under-invoice exports, (iii) delay legal repatriation, or shift their corporate headquarters to hyper-predictable regional hubs like Dubai or Singapore, structurally reducing Sri Lanka’s long-term foreign exchange inflows.
Global Precedents: Compulsion vs. Liberalisation
To understand where Sri Lanka stands, we must look at how the rest of the world navigates this delicate balance (See Table 1):
The global lesson is unambiguous: While administrative compulsion can serve as a temporary emergency buffer—a practice tolerated by the IMF during economic stabilisation phases—no nation has ever achieved sustainable, high-growth status by continuously dictating how private enterprises manage their residual revenue.
The Liquidity Jam: Connecting the SVAT and Conversion Debates
This tension is not new; it mirrors the previous parliamentary friction regarding the abolition of the Simplified Value Added Tax (SVAT). Under pressure from the IMF to eliminate revenue leakages and tax evasion, the government dismantled SVAT. Dr. de Silva vigorously opposed this move at the time—a stance critics labelled as mere populism.
However, I think that the structural link between the SVAT debate and the current export conversion mandate is undeniable. By abolishing SVAT, the state forced exporters to pay taxes on inputs upfront and wait indefinitely for bureaucratic refunds, locking up their domestic liquidity. Now, by tightening the conversion rule, the state is simultaneously restricting its foreign-currency liquidity. When a government squeezes a country’s primary engine of growth—its exporters—from both the domestic tax and foreign-exchange sides, it risks stalling the very development initiatives it aims to protect.
The Balanced Blueprint: Creating a Scaffolding Transition
The path to true, sustainable economic growth requires transitioning from regulatory coercion to institutional stability. The CBSL’s strict conversion directive should not be viewed as a permanent feature of Sri Lanka’s economic policy, but rather as temporary stabilising scaffolding.
To balance immediate financial safety with long-term investor confidence, I think that the state must implement a benchmark-driven policy framework:
· Conditional Sunset Clauses: The CBSL should formally tie the expiration of the mandatory 30-day conversion rule to clear, objective macroeconomic milestones—such as reaching six months of import reserve cover. This transforms a “draconian rule” into a predictable, transparent transitional mechanism.
· Automated VAT Refund Bridges: To alleviate the cash-flow pressure caused by the removal of SVAT, the Ministry of Finance must implement an automated, digital tax-refund system that guarantees input refunds to compliant exporters within 14 days. If the state demands its dollars quickly, it must return its tax cash flows just as rapidly.
· Incentive-Driven Retention (Moving from Force to Reward): Instead of using legal mandates to force dollar conversion, the financial system should use market rewards. Commercial banks must design competitive, inflation-adjusted, rupee-denominated investment products specifically tailored for exporters. To a business, money behaves like water—it flows where it is treated best. If the Central Bank manages the domestic currency competently so it holds its value, and commercial banks offer attractive, high-yielding rupee accounts that beat inflation, market players will choose to convert their dollars voluntarily to maximize their profits. When the rupee becomes a lucrative asset to hold, draconian administrative mandates naturally become obsolete.
Summary
The ongoing debate in Parliament over the Central Bank of Sri Lanka’s (CBSL) sudden tightening of export proceeds conversion rules highlights a fundamental tension in national policy. While the main Opposition, represented by Dr. Harsha de Silva, warns that forced residual conversions mark a return to “crisis-era” draconian dictates that deter investors, the CBSL’s actions have curbed exchange-rate speculation and stabilised the rupee. This article argues that the general public is trapped in an unnecessary dichotomy because political discourse fails to separate Micro-Pragmatic FX liquidity management from Macro-Structural economic signalling. In my view, by transitioning from regulatory compulsion to institutionalised trust, Sri Lanka can balance short-term currency stability with long-term, export-led growth. This is our aspiration.
Conclusion: Trust as the Ultimate Economic Currency
Ultimately, a country cannot build a competitive, export-led economy on a foundation of legal mandates and constant regulatory interventions. While the Central Bank fulfilled its immediate duty by intervening to break a speculative cycle and defend the rupee, the Opposition’s warnings about investor psychology are valid.
True economic modernisation requires recognising that short-term micro-pragmatism and long-term macro-structuralism are not mutually exclusive. By converting the current restrictive mandates into a transparent, transitional framework supported by aggressive tax digitization, Sri Lanka can move beyond reactionary crisis management. In my view, the ultimate goal of national economic planning must be to cultivate an environment in which local and international capital remains in the country, not because a Gazette mandates it, but because institutional trust demands it.
(The writer, among many, served as the Special Advisor to the Office of the President of Namibia, from 2006 to 2012, and was a Senior Consultant with the UNDP for 20 years. He was a Senior Economist with the Central Bank of Sri Lanka (1972-1993). He can be reached via asoka.seneviratne@gmail.com)
By Prof. Asoka S. Seneviratne
Features
‘There are no private universities in Sri Lanka’ – some considerations for higher education reform
Academics involved in education policy like to say that there is no such thing as a private university in Sri Lanka. The only ‘universities’ in the country are state universities; anything else offering degrees is a private higher education institution (HEI). This position is technically accurate. Yet, in the discourse and imagination of the public, private universities are very real – people teach in them, students register in them, families pay fees, and such degree holders enter job markets in Sri Lanka and outside.
For decades, activists concerned for public higher education have ignored or resisted looking at private HEIs, as if such scrutiny would taint them. Others have worked in both types of institutions, carrying practices from each to the other. The apex body governing state universities, the UGC, has, meanwhile, ignored the concept of conflict of interest and appointed individuals in private higher education in committees and leadership positions. It is unsurprising then that some of the ideologies informing private higher education appear in reform agendas in the state sector.
This is a good time then to consider the varying types of private HEIs around us, and to take a look at some of the issues within them in the hope that higher education reform agendas will include private, as well as state higher education.
What is a ‘private university’?
First, some clarifications. In the public imaginary, a ‘private university’ is typically an institution that provides a foreign or local degree for which the student makes a payment. But this broad classification encompasses a host of diverse institutions and types of degrees which I detail below.
The Non-State Higher Education Division (NSHE) of the Ministry of Education has recognised 295 degrees by 32 institutions. Most of these are private companies and include a handful of established, well-known private HEIs that are ‘university like’. The degrees are local degrees conferred by the institutions accredited by the NSHE Division. While private HEIs conferring local degrees must be accredited by the NSHE Division, there appears to be no legal consequence for not doing so. In addition, there are several permutations of the private degree that miss the net of this Division and the Standing Committee on Accreditation and Quality Assurance (SCAQA) that assists this Division.
For one, degrees conferred by foreign universities offered, via these same private HEIs, are not vetted by the NSHE Division. Secondly, there is a growing plethora of private HEIs which have either no physical presence locally or only a dubious presence. The University Grants Commission has notified the public, through their website, that foreign universities listed in the Commonwealth Universities Yearbook and the World Higher Education Database are recognised, but refrained from giving any other details – which degrees? Offered by what modes? These details are not known. Some of the foreign universities in the lists may be legitimate entities in their own land but the degrees conferred locally, in their name, may not adhere to curriculum or teaching specifications of the NSHE Division or the UGC.
Another troubling phenomenon is the ‘top up degree’, which appears to work on the same principle as that of a pre-paid mobile connection: if I have a Diploma or an HND of a sort, I am eligible to complete a course of study which provides me with a degree, usually from a foreign university. The idea that someone who does not initially qualify for a degree programme should be able to work their way towards one is a progressive notion. This is the concept that open and distance learning (ODL) was based on initially, but which is now sadly exploited. ODL models are expected to provide opportunity for learning for those who may be excluded from traditional learning institutions. In Sri Lanka, however, we have seen ODL become a marketplace offering easy to obtain, for-fee qualifications by institutions with little commitment to superior teaching and learning.
Finally, a perusal of the many types of private HEIs and their varied degrees bring to mind another question – how should the private degrees, provided by state institutions (that are not educational institutions), be regulated? Who should do so?
All of these create a host of problems for the public – for hopeful students and parents and trusting employers. For the higher education sector, recruitment of academic staff, too, has become difficult due to this plethora of ambiguous higher education qualifications, as I discussed in a previous Kuppi article (‘Recruiting academics to state universities’).
Some issues in private HEIs – a bellwether for change in state universities
In this second part of this article, I will discuss some aspects of work in private HEIs – albeit the more established institutions – given that such issues may appear in reform agendas in future.
Across state universities, all permanent staff of a specific category are paid according to the same criteria. The picture is not so clear when it comes to private HEIs since they are different entities legally, typically companies. Private HEIs have salary scales and financial incentives that are different to each other. The more established private HEIs reportedly have attractive renumeration packages, possibly a reason for academics of state universities migrating eagerly to such institutions during sabbatical years and on retirement. This may not of course be the case with other less established, or improperly registered HEIs of which we know little. Academic staff of these more accepted private HEIs seem to value the high financial remuneration they receive (in comparison to state universities) as something that makes their work rewarding.
Attractive remuneration is important to sustain the good life and is at times seen as the institution’s way of encouraging good work. Yet, this has implications for the future of the institution: to continue to deliver on promised financial packages, institutions must continue to have large profit margins. One strategy has been to enroll multiple cohorts of students per year, even up to three or four intakes per year. This can result in exploitative work conditions, since staff must cater to all these cohorts in that same year. If there is inadequate staff, employees are further burdened. On the other hand, if there is a sudden drop in enrolments (degrees can go out of fashion) unexpected layoffs occur. Similar to other sectors that employ short-term contract staff – including state universities – in private HEIs, too, individual teachers, who are on short term contracts that need regular renewal, can feel pressured to work under difficult or exploitative conditions.
At the same time, even in the more established private HEIs, work norms differ from those of state universities in that they include promotional work that keeps the institution’s name in the eye of the public. The Marketing (or similarly named) unit comes up in conversations as one of the most important departments. It appears to weigh in on decision-making related to the number of staff, the amount of re-sits per exams, and other pedagogically important matters. This is a worrying example of how financial rationales interfere with pedagogically or academically sound processes, resulting in problematic results in the classroom. On the plus side, junior colleagues, who had experience in both state and private HEIs, also felt that they faced less harassment in private HEIs – primarily due to the private HEIs ability to take swift action in reported cases of harassment. This is a real indictment on state institutions and their reluctance to address chronic issues of harassment in our universities.
Yet, while we hear much about problems in state universities, we hardly hear of problems that staff in private HEIs face. One rationale for a lack of public expressions by staff is that expressions of discontent might lead to trouble given the importance of reputation for private HEIs. The worry about reputational damage is a growing concern in state universities, too, as evidenced by social media policies and internal conversations on reputational damage, consequent to negative publicity. Institutional worries of reputational damage are harmful in the long run since these impact not only freedom of expression by student and staff, but also research that is possible in and about the education sector.
Some thoughts at the end…
A close look at the private higher education sector is important given its strong presence in the country. Impending reform needs to regulate this diverse array of higher education offerings in the private sector, as well as the state institutions that offer privately-funded options of higher education (a topic for a separate Kuppi on its own). It is time we carefully considered how to build a whole system of higher education out of this broken mess.
Kaushalya Perera is a senior lecturer at the University of Colombo.
Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies.
Features
Ready for solo spotlight
Singer Nish Peiris is set to take the next big step in her music journey.
The talented vocalist, who has been seen and heard in the scene here for a short while, and was also featured with the now-defunct band, Inner Vision, has announced that she will be fully committing to her solo career, after completing her degree this year.
“I’m finishing my degree this year, and after that I’ll be fully committing to my solo music career,” Nish told The Island.
“I’ve already got a few tours lined up for next year, so I’m really excited for what’s ahead.”
Fans, no doubt, will remember Nish for her smooth voice and stage presence, and the good news is that she is now ready to chart her own path and bring new music to audiences at home and abroad.
With tours already planned for 2027, the year 2026 promises to be an exciting year for the young artiste as she steps into the spotlight on her own.
We wish Nish every success in this new chapter!
Features
Exclusive musical evening for Sri Lankans in Toronto
While Sri Lankan music lovers, in Dubai, are eagerly looking forward to being a part of the action on Saturday, 25th July, with Rajiv Sebastian in the limelight, Sri Lankans, in Toronto, Canada, are equally excited and are anxiously awaiting the arrival of Sri Lanka’s famous singer/entertainer Sohan Weerasinghe.
Having done the needful with The X-Periments, the legendary performer has now embarked on an exciting new chapter – a solo career – and Toronto, Canada, will see him do the needful, on Friday, 31st July, 2026, from 8.00 pm to 12.00 am, at the Angus Glen Golf Club.
Reports indicate that it’s a ‘sold out’ event – naturally with Sohan in the spotlight.
Having built his reputation through years of unforgettable performances, and hits that became part of our musical fabric, Sohan is ready to bring his own vision, sound, and stories directly to the audience, in Toronto, Canada, backed by the phenomenal Toronto Ceymphony Live Band.
Says Gamini Hemalal, who has been instrumental in reviving the Sri Lankan entertainment scene, in that part of the world:
“The countdown begins for the most exclusive musical event of the summer! Join us for a premium night of incredible music, elite hospitality, and a lavish buffet as the legendary Sohan Weerasinghe takes the stage live in Toronto!
“This is a high-end event, designed for those who appreciate exceptional entertainment and great food.”
Gamini, who is also a member of the Toronto Ceymphony Live Band, mentioned that it’s going to be an intimate musical evening with the celebrated Sohan Weerasinghe.
From packed auditoriums to intimate shows, Sohan continues to prove why he remains one of Sri Lanka’s most beloved entertainers.
For decades, Sohan Weerasinghe has been a household name in Sri Lankan entertainment.
Known for his captivating smooth voice and charismatic stage presence, Canada will experience it all on Friday, 31st July.
Next on the list of events, Gamini Hemal is working on, is Halloween night and he says “what we plan to do will be very interesting and unique … with a surprise guest star, as well!”
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