14 November 2022 08:01 am Views - 2964
Worker remittances income continued its ascent in October reflecting that the worst may be over for the poor run of the key foreign currency inflow source to Sri Lanka, which is instrumental in helping the dollar-starved country to fund its essential imports.
Sri Lanka received US$ 355.4 in October from expatriates living and working abroad, up 12 percent from the same month last year. Thus, October became the second consecutive month to record higher remittance inflows on year-on-year basis, after a year-long declining streak of such inflows was ended
in September.
However, year-on-year comparisons make less sense as remittance inflows to Sri Lanka went downhill since June last year when the parallel exchange rates sprung up in the informal market offering attractive premiums to that of what the banks offered.
This caused Sri Lanka to lose around US$ 1.5 billion worth of remittances last year from a multi-year high of US$ 7.1 billion collected in 2020.
Meanwhile, the remittance income measured on a monthly basis showed a slight slippage in October from US$ 359.3 million recorded in September through which the income stream grew for three consecutive months starting from June.
The Central Bank let go of the rupee in March, which it held at Rs.199/203 since 2021 causing the rupee to give up 80 percent of its value, providing the Sri Lankan expatriates a much better deal in rupee terms when they repatriate their hard-earned money.
In a further bid to reroute remittances through the banking sector, the Central Bank in May imposed restrictions on the use of open account payment terms or consignment account terms. By doing that the Central Bank expected to limit the demand for foreign currency from informal channels such as Unidiyal and Hawala, which in turn would discourage such channels to buy foreign currency from remittances or any other means.
While the monthly remittances haven’t reached their previous highs of around US$ 550 to US$ 600 million, the monthly increase set off in June provides evidence that these measures are taking effect.
Meanwhile, it was also discovered that there had been years-long discrepancy in reporting on worker remittances by banks which had overstated the number, which is now being corrected.
However, the authorities expect the current rising trend in remittances to persist as labour migration has reached an all-time high as the surge in cost of living has forced scores of people to leave the country looking for better lives elsewhere while the government is also introducing new incentive schemes to lure expatriates to use formal channels when they send their earnings back.
Despite recent gains, the cumulative remittance income for the first ten months were at US$ 2,929.4 million, down 40.2 percent compared to the same period last year.