-By Lanka e News Investigations Desk
(Lanka-e-News -07.Nov.2025, 11.00 PM)
In the name of “international practice,” a quiet financial crime is taking place at Sri Lanka’s ports — one that directly violates the country’s currency laws, undermines exporters, and quietly siphons away millions of US dollars every month.
Major shipping lines operating in Sri Lanka — aided by a network of local agents — are demanding payments in US dollars from Sri Lankan exporters, in blatant defiance of the Monetary Law Act and Central Bank circulars. These shipping companies, most of them global conglomerates with headquarters in Europe or Singapore, are not merely charging freight in foreign currency — they are coercing small and medium local exporters to settle invoices inside Sri Lanka in US dollars.
This, in every sense, is an economic colonisation of the Sri Lankan rupee.
The practice is spreading quietly. Several exporters told Lanka e News that when they tried to settle bills in Sri Lankan rupees (LKR), local shipping agents flatly refused, citing “foreign head office policy.” When pressed, they said that even though the service — including port handling, customs documentation, and inland transportation — was entirely performed within Sri Lanka, the invoice “must” be settled in USD.
In plain terms, it means: Sri Lankan companies are being forced to pay in a foreign currency inside Sri Lanka’s jurisdiction.
According to the Monetary Law Act of 1949, and subsequent amendments introduced under the Exchange Control Act, all domestic transactions within Sri Lanka must be conducted in Sri Lankan rupees. Foreign currency payments are allowed only under specific authorisations granted by the Central Bank or relevant exchange control directives.
Therefore, when a shipping line — through a local agent — demands that a Sri Lankan company pay in dollars for a service rendered within Sri Lanka, it directly contravenes the Foreign Exchange (Transactions) Regulations No. 1 of 2017, and Circular No. 02/2021 issued by the Central Bank’s Department of Foreign Exchange.
It is a simple principle:
“If the service is performed in Sri Lanka, payment must be in Sri Lankan rupees.”
Yet, this rule is being systematically violated — not by small players but by some of the largest shipping agencies and freight operators in the country.
The Central Bank of Sri Lanka (CBSL) is either unaware or unwilling to act.
Exporters, especially those in apparel, tea, and rubber sectors, are bearing the brunt.
A mid-sized apparel exporter based in Katunayake told Lanka e News:
“We earn in dollars and bring those earnings into the country as per CBSL requirements. But now, the same government allows shipping companies to demand that we pay our freight in dollars again. It means that even the dollars we earned must be used locally — so what’s the point of bringing them back?”
This vicious cycle means exporters are forced to use their hard-earned foreign exchange to settle domestic shipping bills — effectively draining their reserves and creating artificial dollar demand inside the economy.
If 100 exporters each pay $10,000 a month to shipping companies, that’s $1 million worth of demand for dollars every month, purely for domestic transactions. Over a year, the collective drain could exceed $100 million.
That is not commerce. That is currency cannibalism.
Behind every foreign shipping line operating in Colombo, there is a local agent — a company registered in Sri Lanka, licensed by the Sri Lanka Ports Authority (SLPA), and authorised by the CBSL to handle local operations.
These local agents are now acting as enforcers of the dollar-payment regime.
Documents seen by Lanka e News show at least five major shipping agents issuing invoices in USD to Sri Lankan companies with a clause stating:
“All payments to be made in USD. LKR payments will not be accepted.”
Some of them even manipulate the conversion rate, forcing exporters to pay at inflated exchange rates, creating a hidden margin of 3–5% on every invoice.
When questioned, one shipping agent’s manager told Lanka e News:
“We are only following instructions from the head office. The freight and handling charges are calculated in USD, and our system does not allow LKR billing.”
The “system” in question, of course, is designed in such a way that it bypasses Sri Lankan regulatory oversight. The Central Bank cannot easily trace these transactions because they are often settled through dollar-denominated accounts, including offshore correspondent bank routes.
In other words, Sri Lanka’s exporters are being used as dollar funnels for multinational shipping giants.
The dollarisation of the shipping sector has multiple ripple effects:
Artificial Dollar Shortage – Exporters’ retained earnings are recycled into domestic freight payments instead of being available for genuine imports or debt repayment.
Rupee Depreciation Pressure – Increased local dollar demand exerts upward pressure on USD/LKR rates.
Reduced Liquidity in the Banking System – Dollars are drained from exporter accounts and routed offshore, weakening local foreign exchange reserves.
Unfair Competitive Advantage – Smaller local logistics firms that bill in rupees are undercut and squeezed out.
In the long run, this could cripple the rupee’s sovereignty, turning Sri Lanka into a dual-currency economy dominated by dollar transactions — a trend seen previously in unstable economies like Zimbabwe or Lebanon.
The Central Bank of Sri Lanka (CBSL), particularly its Foreign Exchange Department, has the legal authority to investigate and penalise such practices.
Under Section 7(3) of the Foreign Exchange Act No. 12 of 2017, CBSL can suspend or revoke the authorisation of any person or company found to be “engaging in or facilitating transactions contrary to the provisions of this Act.”
But so far, silence.
Why?
Because some of these shipping firms have political protection.
Industry insiders told Lanka e News that several shipping agents maintain strong ties with former finance ministry officials and even current parliamentary advisors who are “on retainers.” A few have reportedly contributed to political campaign funds during the previous administration — ensuring that no sudden audit “accidentally” lands on their desks.
The situation exposes a glaring hypocrisy in Sri Lanka’s economic policy.
On one hand, exporters are legally required to convert 25% (previously 100%) of their foreign earnings into rupees under CBSL’s conversion rule.
On the other hand, foreign shipping companies are allowed to demand dollar payments from those same exporters inside the country.
It’s like forcing a patient to donate blood — and then selling him back his own plasma at double the price.
This double standard is crippling exporters who are already facing thin margins due to rising energy costs and global demand shocks.
Globally, the shipping industry is dominated by a few mega players — Maersk, MSC, CMA CGM, and Hapag-Lloyd — who collectively control more than 70% of global container traffic.
In Sri Lanka, these giants operate through local agents, who enjoy almost monopolistic control over the Colombo Port’s export shipping routes.
This oligopoly allows them to dictate payment terms, manipulate freight rates, and even decide which exporters receive space on vessels.
By forcing payments in USD, they have created a parallel financial pipeline, independent of the Sri Lankan economy — one that serves their global treasury operations.
A senior lawyer specialising in financial regulation explained to Lanka e News:
“There is no legal basis for a Sri Lankan resident to make a payment to another Sri Lankan resident in a foreign currency, unless authorised by the Central Bank. Even if the recipient is an agent of a foreign company, the transaction occurs within the territory of Sri Lanka and is therefore subject to local currency law.”
This means every such dollar payment may potentially constitute a breach of Section 4(1) of the Foreign Exchange Act — punishable by fines or even imprisonment for those knowingly engaging in unauthorised foreign exchange transactions.
Furthermore, shipping agents themselves could be held liable for “facilitating illegal foreign exchange transfers” under the same Act.
Data obtained from exporters show that some shipping agents are overstating exchange rates when exporters attempt to pay in rupees.
For instance, when the CBSL official rate was LKR 300 per USD, some agents quoted rates as high as LKR 325–330, pocketing the difference. Over thousands of transactions, this amounts to millions of rupees in hidden profits — effectively a shadow exchange business operating under the guise of shipping logistics.
A former central banker told Lanka e News:
“This is a textbook case of exchange manipulation disguised as commercial billing. If left unchecked, it can distort the country’s entire external sector reporting.”
It is high time that the Central Bank, the Ministry of Finance, and the Committee on Public Finance launch an immediate investigation into these practices.
Such an inquiry should determine:
Which shipping lines and local agents have demanded dollar payments;
Whether such payments were authorised under CBSL regulations;
The cumulative outflow of foreign currency arising from such payments;
The role of local banks in facilitating dollar settlements; and
Whether political or bureaucratic collusion prevented regulatory enforcement.
Small exporters — from spice traders in Matale to rubber processors in Ratnapura — are now forced to keep dollar accounts and manage complex forex payments just to ship a few containers.
One exporter lamented:
“We export cinnamon worth $8,000, and the freight agent demands $1,200 in dollars. So we lose 15% of our foreign earnings on domestic services. This is madness.”
For an economy struggling to rebuild post-default, every dollar counts. Allowing multinational shipping lines to drain foreign exchange at source is not just negligent — it’s economic treason.
The solution is simple: enforce the law.
The Central Bank must issue a directive clearly stating that all domestic transactions, including freight and port handling charges, must be settled in rupees unless specifically exempted.
The Sri Lanka Ports Authority and the Ministry of Ports should immediately suspend the licenses of any shipping agents violating these regulations.
At the same time, the CBSL should create a whistleblower mechanism for exporters to report coercive dollar-payment demands confidentially.
If Sri Lanka wants to stabilise its currency, it must first stop bleeding dollars at home.
This issue is more than a technical breach of foreign exchange law. It is a symptom of a larger disease — Sri Lanka’s surrender of economic sovereignty to global corporates under the banner of “international practice.”
Every time a local company pays another local entity in USD, the rupee loses its meaning. Every such transaction is a small crack in the wall of national financial independence.
And if left unaddressed, one day soon, we may find that the rupee — like many promises made to this nation — is merely a decorative relic on the wall of a dollarised economy.
Until then, Lanka e News will continue to ask the questions that those in power prefer to ignore:
Who authorised this?
Who benefits from it?
And why is the Central Bank asleep while Sri Lanka’s exporters are paying for local services in foreign currency?
-By Lanka e News Investigations Desk
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by (2025-11-07 17:43:36)
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