Overseas remittance inflows heavily used for consumption: Economist

Migrant worker remittances received by Sri Lanka are almost entirely spent on consumption and are not mobilized in to investment generating activities, raising concerns over its ability to provide economic value addition in the long run.

Research Economist at Sri Lanka’s economics policy think tank Institute of Policy Studies (IPS), Anushka Wijesingha recently said, though Sri Lanka’s huge remittance inflows immensely help to bridge the trade gap, the country does not have a policy to mobilize these inflows beyond consumption.

“Research studies on agricultural families who usually get huge amounts of remittance money, have shown that they don’t invest them even to purchase a tractor or share with other villagers to buy a combine harvester,” he told a top business executives forum.

In contrast, in Philippines which has somewhat similar economic attributes to that of Sri Lanka, remittances play a huge role in driving their economy.

Wijesingha however appreciated the role played by the remittances so far in driving economic growth even through consumption.

“If you look at the consumption part of growth, remittance money coming in to the country has been a major player because these remittances go straight in to the rural economy and change their aspirations,” he demonstrated. Country’s worker remittances topped US $ 6.0 billion in 2012 contributing as much as 60 percent to bridge the wide trade gap and also provide a cushioning for currency weakening.

Meanwhile the Senior Economist at Heyleys Group, Deshal De Mel said remittance flows are not sustainable forms of flows that the country could rely on to protect its external front.

“It is something that we cannot rely on going forward, having migrant remittances as a way of significant component of our external income. This is mainly because Sri Lanka doesn’t have significant natural resources and our labour being the most valuable resource,” he remarked. (DK)