Workers’ remittances in 2021 fall to 10-year low

Workers’ remittances in 2021 via banking channels have declined to a 10-year low, sparking fresh concerns over Sri Lanka’s biggest net foreign exchange earner.

As per provisional data released by the Central Bank, Sri Lanka received only $ 5.5 billion in workers remittances last year, down by $ 1.6 billion, or a hefty 23%, from $ 7.1 billion in 2020. The previous lowest was in 2012 at $ 5.98 billion.

In December, the inflows were only $ 325.2 million, lower by more than twice, or nearly 80%, as against $ 813 million received a year ago. However, it is higher compared to $ 271 million in November and $ 317 million in October.

The latter could be attributed to spate of measures by the CBSL to encourage remittances via official banking channels with an incentive of Rs. 10 extra per dollar and other benefits. Inflows via illegal means fetch Rs. 230-250 in the black market. Some analysts expect inflows to improve in January in tandem with stepped up promotion by the banking sector. 

Workers’ remittances as a percentage of GDP, which averaged around 5.7% during the 1981-2000 period, increased to around 8% of GDP during the period from 2001-2020, reflecting the increased importance of workers’ remittances in relation to Sri Lanka’s GDP. Nevertheless, remittances have shown a declining trend during the past seven years except for 2016 and 2020.