Rising workers’ remittances: Timely salvation to the economy

In much solace to the performance of the external sector, Sri Lanka’s workers’ remittances increased considerably by almost 70% during January to September this year to $ 4.35 billion from $ 2.6  billion in the corresponding period of 2022. 

Workers’ remittances have been a major component of Sri Lanka’s foreign currency earnings, providing a substantial comfort against the large trade deficits the island is accustomed to and thus strengthening the safety of the economy. Being a key source of foreign exchange earnings, workers’ remittances have covered around 80% of the annual trade deficit, on average, over the past two decades and have been the prime generator of foreign exchange to the economy over the last decade or so (except in 2022), surpassing other major earners such as apparel exports and tourism receipts.

Historically, migrant labourers have been a driving force for Sri Lanka’s economy and remittances as a percentage of the GDP averaged around 5.7% from 1981 to 2000, and then rose to about 8% between 2001 and 2020. On average, the island received around $ 7 billion during 2015 to 2020 from expatriate workers. However, during 2021 and 2022, remittances displayed a downward trend and last year they plunged to a historical low of $ 3.8 billion, mainly due to the short-sighted foreign exchange rate regime maintained by the former Central Bank Governors W.D. Lakshman and Ajith Cabraal. As the Monetary Authority maintained an unofficial peg of 200-203 rupees to a dollar from September 2021 to March 2022, the migrant workers switched to informal channels like Hawala that were offering far more attractive rates than banks.

The increase in remittances comes despite the parochial appeals by prominent NPP/JVP political leaders – such as Sunil Hadunnetti – to workers abroad to stop sending money to their loved ones back home in order to achieve their narrow political gains. According to the Sri Lanka Bureau of Foreign Employment’s statistics, close to 311,000 people left the island for foreign employment in 2022, which is significantly higher than the average departures for overseas jobs between 2015 and 2019 (prior to the COVID pandemic). The unbearable cost of living in addition to the social unrest witnessed in the country would have forced many people to seek jobs overseas.

The Government too realising the necessity to increase foreign earnings extensively, has reduced the minimum age for women to work overseas to 21 years, reflecting a withdrawal from the previous policy of discouraging young women from seeking jobs abroad, which came into place after a 17-year-old Sri Lankan nanny had been beheaded in Saudi Arabia. Nevertheless, the ongoing military tension in Gaza could dampen the inflows from workers in the Middle East during the latter part of the year.

Traditionally, Sri Lankans left for countries such as Saudi Arabia, the UAE, Kuwait, Qatar, etc. for overseas employment. Be that as it may, with the changing times, South Korea, Japan, and Israel too have emerged as preferred choices in the recent past for the aspiring, ambitious youth in the crisis-hit nation. Ageing populations in Japan and South Korea could further open up work opportunities for the Sri Lankans, and policymakers should devise and implement plans of action to train the human resources in the country to match the labour market requirements in those countries, as they offer benevolent social protection and work conditions.

More than 1.6 million Sri Lankans work abroad but despite their immense contribution, successive governments have only paid a scant regard to their interests. Sri Lanka’s expatriate workers are unable to vote at any elections held in the country, and no political party has paid attention to work out an arrangement that enables them to exercise their franchise. Moreover, during the pandemic, they were requested by the Rajapaksa Government to refrain from returning to their motherland. Surely, they deserve better, and it is hoped President Wickremesinghe would take progressive steps to improve the welfare of migrant workers.