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Workers’ remittances get Rs. 10 per dollar incentive

01 Dec 2021

  • Central Bank’s December offer to attract foreign exchange
In an attempt to boost Sri Lanka’s foreign exchange reserves, the Central Bank of Sri Lanka (CBSL) will pay an incentive of Rs. 8 per US dollar for workers’ remittances, in addition to the existing incentive of Rs. 2, when such funds are remitted through licensed banks (LBs) and other internationally accepted formal channels and converted into Sri Lankan rupees during the period from 1 to 31 December 2021. Accordingly, the total incentive for inward workers’ remittances converted into Sri Lankan rupees during the month of December 2021 will be Rs. 10.00 per US dollar, the CBSL announced in a press release yesterday (1). Termed the “Incentive Scheme on Inward Workers’ Remittances”, the CBSL expects the additional incentive provided to attract more workers’ remittances to the country through the formal banking channels, thereby improving the foreign currency liquidity in the domestic foreign exchange market. “At the same time, several measures are being taken by the CBSL and the law enforcement authorities to curtail informal fund transfer channels, which would, in turn, further encourage migrant workers to use formal channels to remit their hard-earned foreign exchange to the benefit of their dependants,” the CBSL said in the press release. Sri Lanka has been plagued by a foreign exchange liquidity crisis since 2020 as a result of the loss of tourist revenue, following the Covid-19 pandemic and its foreign debt servicing obligations. The Morning reported earlier this week that the CBSL is unlikely to revoke the directive sent by them to licensed commercial banks (LCBs) by former CBSL Governor Prof. W.D. Lakshman days before his resignation, advising the banks to keep the selling rate of the US dollar below Rs. 203. Current CBSL Governor Ajith Nivard Cabraal confirmed this during a recent webinar in which he expressed his plans to maintain the Sri Lankan rupee at its current rate throughout the first quarter (1Q) of next year. “We won’t have a depreciation of the rupee in 1Q 2022; we are confident that the rupee would maintain its value, and it will probably have an opportunity of appreciating a little more in value,” he said at a webinar held by the International Chamber of Commerce. Despite assurances by the CBSL that it will crack down on informal money exchangers – as the disparity between the exchange rate set by the CBSL and the value set by the black market widens – foreign workers continue to remit money via informal channels. As of Monday, the Canadian dollar was sold at Rs. 195 (CBSL rate – Rs. 161) and the US dollar was sold at Rs. 237 (CBSL rate – Rs. 203) through informal channels.

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