Workers’ remittances dip via banking channels in April despite rupee’s free-float

Monday, 23 May 2022 03:22 - - {{hitsCtrl.values.hits}}

Workers’ remittances have declined to $ 249 million in April as against $ 318 million in March.

The decline is significant considering the fact that Sri Lanka opted to a free-float exchange regime from early March onwards.

In the first four months of 2022, workers’ remittances amounted to $ 1 billion, down by 57% from the corresponding period of last year. The April 2022 figure is also down by 52% from $ 519 million inflow a year ago.

Latest data reinforces Sri Lanka’s struggle to woo workers’ remittances via official banking channels and the dip despite sharp 30% depreciation in March appears not attractive enough. However, the increase in inflows in March to $ 318 million from $ 205 million was credited to the depreciation of the rupee and in that context the 22% dip in April from March is of concern.

According to the Central Bank during the year up to 20 May 2022, the rupee depreciated against the dollar by 44.2%. Given the cross currency exchange rate movements, the rupee depreciated against the Indian rupee by 42.0%, the euro by 40.3%, the pound sterling by 39.5% and the Japanese yen by 37.9% during this period.

A fortnight ago, the CBSL began issuing a guidance middle rate for inter-bank forex transactions. On Friday it was Rs. 354.48 (buying) and Rs. 364.45 (selling).

The premium or the gap in black market too has been on the decline, a development which has prompted forex market analysts to hope for a pick-up in inflows via official channels in May. Others however opined that lack of confidence following the economic and political crises and social unrest has led more people to remit money via unofficial channels.

Last year workers’ remittances plunged to a 10 year low of $ 5.5 billion, down by 23% from 2020.