Rupee float fails to end downward spiral of remittance income

• March remittance income down 48% YoY to US$ 318.4mn
• However, it was an increase from US$ 204.9mn in February 
• Cumulative remittance income in 1Q down 58% YoY to US$ 782.5mn

An immediate flare up is seen in remittances after the rupee float appeared to have fizzled out, as the March remittance income had come just about half of what was witnessed in the same month last year.

According to the latest data released by the Central Bank, the Sri Lankan migrants sent back US$ 318.4 million of their earnings in March 2022 compared to US$ 612 million in the same month a year ago. This translated into a 48 percent plunge between the two periods and marked the tenth consecutive month of declines since the current falling streak began in June last year in response to the emergence of the informal channels which began offering substantially higher conversion values compared to official channels.  

With the March data, the cumulative remittance income in the first three months has declined by a sharp 58.1 percent to US$ 782.5 million. In the corresponding period last year, Sri Lanka received US$ 1,867.1 million in total remittances.  There was clear evidence of a spike in remittances via the formal banking channels in the immediate aftermath of the rupee float on March 7, but the data indicated that that exuberance had quickly faded in the days and weeks that followed due to the re-emergence of higher black market rates. 

Even after a 70 percent decline in value of the rupee against the dollar, Sri Lanka has been unable to find liquidity in the domestic foreign exchange market, sparking concerns of how far the rupee plunges before the dollar supply and demand find their equilibrium. 

March typically brings the highest remittance income in a year ahead of the Sinhala & Tamil New Year. However, there is some uptick seen in March from the US$ 204.9 million remittance income received in February.
Sri Lanka received US$ 7.1 billion in remittance income in 2020 and US$ 5.49 billion in 2021.