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The Central Bank of Sri Lanka tightened the screws on the country's exporters. Under a new Extraordinary Gazette, issued as the Repatriation of Export Proceeds Rules Number Two of 2026, direct exporters must now bring their foreign currency earnings home and convert any leftover balance into rupees by the 10th of the following month. Dollars may still be set aside for approved purposes, loan repayments, expatriate salaries, dividends to foreign investors, but whatever remains must be turned into rupees, on the clock, every month. Indirect exporters are caught by the same net. The intended effect was immediate, and it worked. The rupee, which had been sliding towards 337 to the dollar, strengthened to around 330 almost as soon as the rule landed.

The mechanics are straightforward. Exporters have less than a month from the date of sale to repatriate their proceeds and surrender the unused balance to a commercial bank. That compresses what would otherwise be a slow, optional flow of dollars into a forced monthly tide. In a market this thin, the inflow is enough to halt the slide of the currency and reverse it. For Dr W.A. Wijewardena, the former Deputy Governor of the Central Bank, the question is not whether the rule works in the short run. It plainly does. The question is what it costs.

Wijewardena is candid about why the regulator reached for so blunt a tool. With reserves that the Central Bank cannot freely spend in defence of the currency, and a market shallow enough that visible inaction would itself trigger panic, the menu of options was narrow. The repatriation rule is, as he describes it, a hand-twisting measure adopted because no gentler intervention was available. That is not a defence of the policy. It is a description of how thin the policy space has become.

The warning begins where the short term ends. The very act of forcing money in, he argues, sends a signal to the rest of the world that Sri Lanka has a foreign exchange problem, and over time, that scares the money away. Remittances, foreign direct investment, and short-term portfolio inflows into government securities all rely on the assumption that money brought in can be taken out again. Once that assumption is in doubt, the senders begin to hold their dollars offshore. The very inflows the rule was designed to unlock start to dry up at the source. In the long run, the regulation works against the objective it was written to serve.

The real fix, in his view, lies not in compulsion but in earning more dollars in the first place. Exports of merchandise and services, and remittances from migrant workers, are the only durable sources of foreign exchange, and they have to be cultivated patiently over years rather than commanded into existence in a single month. Regulations of this kind are useful for buying time, but they cannot substitute for a strategy. They have, in his phrase, a disincentive effect in the long run.

He closes with the image that holds his entire argument together. "These are called shock treatments," he says. "We don't support this kind of shock treatment. We want a free bird's cage without a trap door. When the birds fly into the cage, they must have the certainty and freedom to fly out also." Every policy, he adds, has its pluses and its minuses. The minuses here are much more than the pluses.

The verdict from the former Deputy Governor is finely balanced. In the very short run, the rule does exactly what it was designed to do. It pulls dollars in and steadies the rupee. But a measure that works by compulsion eventually teaches the very people Sri Lanka depends on, its exporters, its migrant workers, its foreign investors, to keep their money out of reach. The cage may be full today. The question is whether the birds will ever fly back into it.