brand logo

Remittances continue to fall despite CBSL warnings

21 Dec 2021

  • Inflows down 55.7% YoY in November
  • Sixth consecutive month of decline in remittances
  • Cumulative remittances in 2021 down 17.9%
BY Shenal Fernando Repeated warnings by the Central Bank of Sri Lanka (CBSL) to foreign workers to avoid unofficial channels such as hawala in remitting their earnings as well as threats of being found guilty of an offence appear to have fallen on deaf ears, as foreign worker remittances fell once again by 55.7% in November. According to CBSL statistics, foreign worker remittances contracted for the sixth consecutive month, falling by 55.7% Year-on-Year (YoY) to $ 271.4 million in November 2021 from $ 611.7 million in November 2020. Consequently, cumulative foreign worker remittances during the first 11 months of 2021 have fallen by 17.9% to $ 5.2 billion, compared to the $ 6.3 billion remittance inflows recorded during the same period in 2020. Sri Lanka has traditionally been heavily reliant on foreign worker remittance. However, following the collapse of the tourism industry in 2020 due to Covid-19, foreign remittances have become an essential source of foreign exchange to Sri Lanka. Yet, since June, foreign worker remittances have started decreasing as workers started relying more on unofficial channels such as undial or hawala over the official channels, as they are able to obtain a more favourable rate from the kerb market, which, as per reports, is providing a 15% premium over the official exchange rate published by the CBSL. Consequently, CBSL Governor Ajith Nivard Cabraal claimed that the bank accounts of those who distribute and receive money through unlawful money transmission methods will be frozen. He further alleged that considering the sheer scale of the sum that is being distributed through these unofficial remittance channels, there exists suspicion that a significant portion of such sum is drug money that is being laundered, and advised foreign workers to stay away from such channels in order to avoid being indirectly complicit in such an offence. Furthermore, in its bid to improve foreign worker remittances, the CBSL announced at the beginning of December that it would be granting foreign workers who remit their earnings through licensed banks (LBs) and other internationally accepted formal channels an incentive of Rs. 8 per US dollar in addition to the existing incentive of Rs. 2 during the month of December. The effectiveness of such measures is debatable, considering the fact that the kerb market still offers a greater return for foreign workers, and the ability of the CBSL to actually implement its threats against these unofficial channels is questionable. Speaking to The Morning Business on a previous occasion, University of Colombo Department of Economics senior lecturer Dr. Shanuka Senarath questioned the feasibility of the proposed strategy to freeze the accounts of those who transmit money through informal methods, because usually, foreign workers will pay an agent of the person running the informal channel in foreign currency, and once paid, the agent will not transfer the money to Sri Lanka. “Instead, the person running the informal channel will pay the foreign worker representative an equivalent amount in rupees. In the absence of a cross-border transaction, how will the CBSL implement its threat to freeze accounts?” he questioned. According to Dr. Senerath, instead of freezing people’s accounts, the CBSL should address the root cause behind why people prefer informal, riskier channels over the formal channels when repatriating the earnings.

Kapruka

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!


More News..