- Remittance income for April was $249 million, down 52% despite the rupee depreciation by 80%
- Migrant workers continue to repatriate funds through informal channels in search of higher rates
- Cumulative income from remittances in the first four months fell 57% to $1.03 billion
Migrant workers do not seem to have understood their duty at a time of serious economic disaster ravaging their home country, as they continue to send their earnings through informal money changers, in pursuit of higher transfer rates than what the banks pay.
The data showed workers’ remittances in April were just a fraction of what they sent a year ago as excessive greed appears to have outlived their commitments if they really want to help their country and fellow citizens who are on the brink of starvation without access to food, cooking gas, fuel and electricity.
Even after an 80 percent drop in the rupee’s value against the dollar since March 7, migrants sent only $248.9 million in April in remittances compared to $518.8 million repatriated in the same month in 2021, a sharp 52 percent drop. .
With April inflows, on a cumulative basis, Sri Lanka received $1,031.5 million in the first four months through worker remittances, compared to $2,385.8 million in the corresponding period of 2021, registering 56.8 percent.
Sri Lanka typically receives $7.0 billion in remittances, and in 2020, the country received $7.1 billion due to unofficial money changers hibernating as a result of the pandemic.
But as Sri Lanka’s foreign exchange problems intensified in June last year and with the central bank sticking to an unrealistic exchange rate, migrant workers opted for informal money changers, who have re-emerged, over banks.
If the current trend continues, Sri Lanka is unlikely to receive even half of its usual annual revenue from remittances in 2022, plunging the country into another economic abyss.
However, the central bank’s tightening of payments via open accounts from May 20 is expected to redirect those who continue to use informal channels such as Andial and Hawala to formal channels.
Migrant workers now charge around 360 rupees per dollar from official banking channels compared to 200 rupees received as of March 7 when the rupee float came into effect. When the rupee was fixed at about 200 to $1, the immigrants earned about 240 and 260 rupees to the dollar through informal channels.
However, the drop in April reflects that they continue to seek higher rates, in addition to the Rs 360 offered by banks from informal channels. Hence, requests and petitions from the authorities, old and new, explaining why migrants should use formal banking channels to repatriate their profits, have not yielded the desired results.
Strict action against informal channels, perhaps through the recent open account ban, may deal a blow to foreign currency collectors as they will be left without a demand to sell their foreign currency in the absence of importer’s demand like all importer payments, except for cases. From the exporters must happen through letters of credit. The Central Bank and the Treasury are currently drafting laws to catch those who store foreign exchange in the form of currency without bringing it to the banks.