Sri Lanka’s heavy reliance on the Middle East for foreign employment places its labour market in a vulnerable position if tensions in the region continue. 

With approximately 77%, or 666 individuals, among the 862 Sri Lankans who depart daily for overseas employment via official channels being destined for the Middle East, the region remains central to both household incomes and foreign exchange inflows. 

Indicators thus far suggest that migration flows and remittances have remained somewhat stable despite the crisis, and during the first two months of 2026, migrant remittances amounted to approximately $ 1.4 billion. 

However, in the context of continued global uncertainty, concerns over potential escalations and their effects on labour demand, worker mobility, and income flows remain, including as to whether prolonged tensions could disrupt Sri Lanka’s labour market, lead to further semi-skilled and high-skilled migration, or have other implications for Sri Lanka. 

Speaking to The Sunday Morning Business, Deputy Minister of Labour Mahinda Jayasinghe said that there had been no substantial impact on the country’s labour market due to the tensions in the Middle East. He further stated that the Government was working at present to address the gap in skilled labour within the domestic market, especially through the introduction of courses and programmes.

“The ministry has initiated several job fairs to identify skill levels and requirements, especially among youth, and we are currently conducting programmes that direct them towards technical training,” he added.

Migration and remittance flows remain resilient

Speaking to The Sunday Morning Business, Institute of Policy Studies of Sri Lanka (IPS) Research Fellow and Head of Migration and Urbanisation Policy Research Dr. Bilesha Weeraratne noted that Sri Lanka remained highly dependent on the Middle East as a destination for labour migration, with the region accounting for over 80% of annual departures. 

In 2025, of the 310,915 workers who migrated for foreign employment, approximately 248,732 were bound for Middle Eastern countries. According to her, this concentration implies that economic or security disruptions in the region could have significant implications for Sri Lankan migrant workers and, by extension, for remittance inflows and the domestic economy.

However, she observed that despite ongoing conflict in parts of the Middle East, available indicators suggested that labour migration and remittance flows to Sri Lanka had remained largely resilient. 

“Although there was a marginal drop in departure, with media reports pointing to layoffs, furloughs, and wage pressures affecting migrant workers, there is also evidence of continued demand for Sri Lankan migrant workers. In the absence of up-to-date departure statistics, demand-side indicators, such as job orders approved by the Sri Lanka Bureau of Foreign Employment, provide useful insights.”

Accordingly, she observed that approved job orders remained strong for the one-month period ending 22 April: 513 from Kuwait, 688 from Oman, 935 from Qatar, 2,938 from Saudi Arabia, and 2,427 from the UAE.

Similarly, she noted that flight operations between Sri Lanka and Middle Eastern destinations had resumed following brief disruptions at the onset of the conflict, indicating continued outward migration. At the same time, she added that there was also no clear evidence of large-scale return migration triggered by the conflict, suggesting that most workers were maintaining their employment abroad.

“Remittance data further reinforces this resilience. Sri Lanka recorded $ 815 million in remittance inflows in March, among the highest monthly totals on record. Given that roughly half of Sri Lanka’s remittances originate from the Middle East, this performance points to the continued presence and economic activity of Sri Lankan workers in the region,” she said. 

However, Dr. Weeraratne also noted the importance of interpreting this figure with caution, as March inflows were typically elevated due to seasonal factors, including the Sinhala and Tamil New Year and the overlap with Ramadan, during which migrant workers often received bonuses and cash gifts. 

Overall, she observed that there was little evidence thus far that the Middle East conflict had disrupted migration flows, remittances, or the domestic labour market significantly. 

Uncertainty and risks

Dr. Weeraratne added: “However, risks remain elevated due to the uncertain and potentially escalating nature of the conflict. A broader regional destabilisation could adversely affect employment conditions for migrant workers and reduce remittance inflows. An emerging concern is the widening gap between the official exchange rate and the curb (parallel market) rate, which may incentivise the diversion of remittances through informal channels.” 

For instance, she explained that in early April, while the official exchange rate was Rs. 312 per US Dollar, the curb rate was closer to Rs. 318 per dollar. According to her, such discrepancies were a key driver of remittance leakage during Sri Lanka’s 2022 economic crisis and could re-emerge if not addressed.

In this context, Dr. Weeraratne believes that policy priorities should include measures to discourage the use of informal remittance channels, the development of contingency plans for large-scale repatriation in the event of escalation, and strategies to gradually diversify labour migration destinations to reduce overreliance on the Middle East.

Better labour protection to retain skilled workers

At the same time, concerns are being raised regarding the broader structure of Sri Lanka’s labour market as well. 

Speaking to The Sunday Morning Business, civil and labour lawyer and Commercial and Industrial Workers’ Union (CIWU) President Swasthika Arulingam stated that while Sri Lanka had previously experienced a skilled labour outflow during the period of the Covid-19 pandemic, it remained uncertain whether the current crisis would lead to a similar trend, since tensions in the Middle East were global in nature.

She explained that with many economies already predicting a potential recession, the situation could evolve into a global crisis that would affect labour markets internationally. Thus, it is necessary to assess how global economic conditions would affect migration trends and whether outflow migration would continue.

Arulingam also raised concerns regarding the protection of Sri Lankan workers migrating abroad, specifically domestic workers and factory workers. She noted that while the Government was encouraging migration, there were ongoing reports of abuse, which had been occurring for some time. In this context, she questioned whether sufficient measures were being taken to ensure worker protection while promoting overseas employment.

Commenting on the domestic market requirements to retain skilled labour in the country, Arulingam highlighted the need for improved worker protection.

“In the domestic labour market, Sri Lanka has long focused on attracting investors, and concerns over investor inflows have frequently been linked to labour protection. However, there is no evidence-based research to support claims that reducing labour protection will attract investors despite such arguments being repeatedly pushed, specifically by employers,” she said.

Arulingam further stated that Sri Lanka already had one of the lowest wage rates in the region, according to certain studies, and noted that wages were being reduced in an effort to attract investors. She emphasised that in order to sustain the domestic labour market and retain workers, Sri Lanka needed better labour protection and higher wages. 

“While there remains a labour force within the country, the continued focus on reducing wages and labour protection is encouraging workers, specifically  skilled workers, to seek opportunities abroad. If Sri Lanka hopes to retain its workforce, particularly skilled labour, better attention needs to be given to labour protection,” she said.

Impact on vulnerable groups

In addition to overall trends, the implications are more pronounced for specific segments of the labour force. 

University of Peradeniya Department of Economics and Statistics Professor S. Vijesandiran stated that with a large number of Sri Lankans employed at present in the Middle East, foreign employment remained one of Sri Lanka’s most stable sources of foreign income, particularly at a time when certain other sectors were experiencing uncertainty. 

He explained that if tensions escalated and persisted, labour migration could be affected from both the demand and supply sides, where Sri Lankans might become reluctant to migrate due to safety concerns, along with reduced demand for migrant labour due to a potential decline in income.

Vulnerable groups, specifically women from certain poverty-stricken backgrounds, plantation communities, and low-skilled workers, rely heavily on labour migration to the Middle East due to limited employment opportunities within Sri Lanka. Prof. Vijesandiran noted that many of these workers were unable to secure jobs locally, specifically in the domestic sector where demand remained limited. As a result, migration to the Middle East has become a key livelihood option for these groups.

Moreover, he observed that income from migrant workers has played a significant role in improving living standards for many families, including supporting education, housing, and small-scale entrepreneurial activities. Thus, he noted that any disruption to migration flows could reverse these gains and push many families back into poverty.

“If remittance-dependent households fell back below the poverty line, the Government would face additional welfare responsibilities. At the same time, creating alternative employment opportunities within Sri Lanka would be challenging due to the country’s limited market size and constrained capacity for large-scale entrepreneurship development,” he said.

Commenting on whether the crisis could lead to increased semi-skilled and high-skilled migration, Prof. Vijesandiran noted that Sri Lanka should consider promoting high-skilled labour migration to countries less affected by tensions. He highlighted that the Government should prioritise skills development, specifically among younger generations, in order to facilitate high-skilled migration, diversify migration opportunities, and reduce reliance on low-skilled labour migration to specific destinations.

Need for strengthening migrant mechanism

Meanwhile, structural issues within the migration system itself have also come into focus. Voice of Migrants Network Executive Director Michael Joachim noted an overall lack in skilled labour development within the country, especially vis-à-vis migration to the Middle East. 

He noted that an increase in skilled labour relative to low-skilled labour had not been notably observed in recent times, especially in relation to the Middle East. He added that there was a lack of encouragement in general for skilled labour migration in the country.

“Within the migrant mechanism, there is a lack of encouragement and technical training development by officers. We seek to strengthen migrant communities so that they themselves can safeguard the interests of migrants and encourage other migrant workers to become more skilled,” he said.

Joachim explained that according to data, the increase in skilled labour migration in the last 4–5 years had not been substantial despite significant emphasis being placed in this regard by many.

“There is a gap in knowledge, skills, or motivation at the grassroots level among officers to promote skilled migration, and Government-sponsored technical training institutes do not collaborate with these officers to attract youth to their institutes. For instance, there are key gaps observable in the scheme called Recognition of Prior Learning (RPL), which was introduced for those who had not undergone formal training in institutes to obtain certification by proving prior experience,” he added.