(An excerpt from an article authored by Mr W A Wijewardena and published in the Daily FT of 28.09.2026).
When the military conflict reached its most intense phase in 2008, a second, equally critical war was being fought directly behind the frontlines.
While soldiers were fighting bravely in the field, the Central Bank was fighting a silent, desperate battle to manage the nation’s collapsing finances.
If the Central Bank had failed in that financial war, the armed forces would have lost the conflict on the ground without firing a single shot.
The challenge at the time was securing the massive amounts of foreign exchange required by the military forces to purchase vital weaponry from overseas suppliers. These suppliers had agreed to supply the necessary military equipment, but strictly on a short-term, three-month suppliers’ credit facility. The defence authorities placed their orders and requested the State-owned Bank of Ceylon (BOC) to open the necessary Letters of Credit (LCs). When these LCs matured after ninety days, the Bank of Ceylon was legally obligated to honour the payments in foreign currency.
However, Sri Lanka’s foreign exchange reserves had run critically low, creating a terrifying national security crisis. The Central Bank was tasked with finding the money to save the military effort from immediate collapse.
The Governor at the time, Ajith Nivard Cabraal, had to deploy desperate measures to secure foreign exchange and meet these heavy international obligations. This included sending several official teams to various countries across the globe to solicit urgent financial support and investment from the Sri Lankan diaspora.
It was a time of absolute desperation behind closed doors. Had the Central Bank failed to provide the necessary foreign exchange during those critical months, the flow of essential weapons, ammunition, and spare parts to the armed forces would have completely dried up. Sri Lankan soldiers on the frontlines would have been left as sitting ducks for devastating terrorist attacks.
Therefore, the ultimate victory in the war was never the result of a single group or a single man’s efforts. There were thousands of unsung heroes working tirelessly behind the scenes in the financial sector, ensuring that the visible heroes fighting on the ground had the tools to win.