'Only grey market crackdown can solve forex market liquidity issue in Sri Lanka' | The Business Standard
Skip to main content
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
The Business Standard

Friday
July 11, 2025

Sign In
Subscribe
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
FRIDAY, JULY 11, 2025
'Only grey market crackdown can solve forex market liquidity issue in Sri Lanka'

World+Biz

TBS Report
13 May, 2022, 11:15 am
Last modified: 13 May, 2022, 11:38 am

Related News

  • Bangladesh opt to bat first to level series against Sri Lanka
  • Dhaka wants to strengthen economic cooperation with Colombo
  • Sri Lanka keen to strengthen relations with Bangladesh's private sector
  • Sri Lanka seeks Bangladesh investment for pharma industry development
  • Sri Lanka train kills elephant despite new safety moves

'Only grey market crackdown can solve forex market liquidity issue in Sri Lanka'

TBS Report
13 May, 2022, 11:15 am
Last modified: 13 May, 2022, 11:38 am
A man counts Sri Lankan rupees at a money exchange counter in Colombo September 4, 2015. REUTERS/Dinuka Liyanawatte
A man counts Sri Lankan rupees at a money exchange counter in Colombo September 4, 2015. REUTERS/Dinuka Liyanawatte

According to the governor of the Central Bank of Sri Lanka, the issues in the foreign exchange market liquidity can be solved by re-directing foreign exchange flows into the formal banking sector.

Currently, over 25% of foreign currency transactions take place outside the banking system, reports the Daily Mirror.

Though in the second half of last year Sri Lanka did take measures to discourage the informal channels of foreign exchange transactions and thereby attempted to reroute such foreign exchange flows—both inflows and outflows—via the formal banking channels, yet with limited success.

The Business Standard Google News Keep updated, follow The Business Standard's Google news channel

However, latest measures such as banning Open Account payment terms and tightening conditions on imports via Documents against Payment (DP) terms and Documents against Acceptance (DA) terms are expected to further limit avenues for informal channels such as Undiyala and Hawala, which thrived since the second half of last year when foreign exchange shortages first emerged in the country.

The new rules on Open Accounts, DA and DP terms will come into effect from 20 May onwards.  

"Even as we speak, about 25% foreign currency transactions occur through the grey market. What we think is that cracking down on the informal market itself can control the domestic foreign exchange market to a greater degree," Central Bank Governor Dr Weerasinghe said on Wednesday.

Meanwhile, the governor again made a plea from both exporters as well as migrant workers to use the formal banking channels at all times when repatriating their foreign currency earnings to restrain the informal market and bring down the grey market premium to an acceptable level.

However, there is a severe trust deficit between the government and those who send foreign currency back home, and as a result they hold off from repatriating their foreign currency earnings.

Explaining further why everyone must use the formal banking channels for their foreign currency transactions, Dr Weerasinghe said the informal market becomes effectively dysfunctional when they start clamping down on open account payment terms.

This is because when the demand for foreign currency fizzles out through Unidiyal and Hawala, there is little to no reason for them to pay a higher rate and buy foreign currency from those who repatriate.

Sri Lanka is at a critical juncture after months-long economic crisis caused by the foreign exchange shortage that precipitated into a political crisis, which then turned into an absolute societal breakdown since this Monday when certain parties angered by the attack on peaceful protestors turned violent and resorted to rioting and vandalism.  

Dr Weerasinghe stressed economic development is not possible in a country where there is no law and order.

Top News

Sri Lanka / Forex / Exchange

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • How tender rules and a lone bidder stall a $2.5b power plant
    How tender rules and a lone bidder stall a $2.5b power plant
  • Sketch: TBS
    No peace through concession — only struggle secures tomorrow
  • Bangladesh and US hold tariff talks for second day on 9July 2025. Photo: CA Press Wing
    35% tariff: Bangladesh, US 'reach general consensus on some issues' on second day of talks; final round today

MOST VIEWED

  • Photo: Mohammad Minhaj Uddin/TBS
    SSC, equivalent results: Pass rate drops to 68.45%, GPA-5 also declines
  • In terms of stream of education, girls maintained their excellence as well. Photo: TBS
    SSC 2025: Girls dominate boys by over 5%
  • Govt vehicle purchase, foreign trip, new building construction banned: Finance ministry
    Govt vehicle purchase, foreign trip, new building construction banned: Finance ministry
  • Students sit for SSC exam at Motijheel Girls' High School on 10 April 2025. Photo: Mehedi Hasan/TBS
    SSC exam results out: Here's how you can check online and via SMS
  • The overall pass rate across all boards this year, 68.45%, is significantly lower than last year's. Photo: Focus Bangla
    SSC 2025: Rajshahi board records highest pass rate, Barishal lowest
  • Representational image. Photo: Collected
    35% tariff: Bangladesh, US 'agree on most issues' as first day of talks ends

Related News

  • Bangladesh opt to bat first to level series against Sri Lanka
  • Dhaka wants to strengthen economic cooperation with Colombo
  • Sri Lanka keen to strengthen relations with Bangladesh's private sector
  • Sri Lanka seeks Bangladesh investment for pharma industry development
  • Sri Lanka train kills elephant despite new safety moves

Features

Photo: Collected/BBC

What Hitler’s tariff policy misfire can teach the modern world

19h | The Big Picture
Illustration: TBS

Behind closed doors: Why women in Bangladesh stay in abusive marriages

22h | Panorama
Purbachl’s 144-acre Sal forest is an essential part of the area’s biodiversity. Within it, 128 species of plants and 74 species of animals — many of them endangered — have been identified. Photo: Syed Zakir Hossain/TBS

A forest saved: Inside the restoration of Purbachal's last Sal grove

22h | Panorama
Photo: Rajib Dhar/TBS

11 July 2024: Riot vehicles, water cannons hit the streets as police crack down on protesters

15h | Panorama

More Videos from TBS

Israel ready to strike back if Iran threatens: Katz

Israel ready to strike back if Iran threatens: Katz

48m | TBS World
India is strengthening ties with Israel

India is strengthening ties with Israel

1h | TBS World
'Hypocrisy' will not continue, Iran tells IAEA

'Hypocrisy' will not continue, Iran tells IAEA

17h | TBS World
OpenAI to release web browser in challenge to Google Chrome

OpenAI to release web browser in challenge to Google Chrome

17h | TBS World
EMAIL US
contact@tbsnews.net
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Advertisement
  • Privacy Policy
  • Comment Policy
Copyright © 2025
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net