A top Sri Lankan policy maker expressed his doubts over the prospects of maintaining worker remittances from the Middle East (ME) this year amid growing financial instability and the political unrest in the region.
The Saudi Arabian government last week announced a record budget deficit and cuts to fuel and utility subsidies amid falling crude oil prices. A quarter of Sri Lanka’s total migrant workers are employed in Saudi Arabia.
According to Sri Lanka’s Deputy Minister of Foreign Affairs Dr. Harsha de Silva, who is a trained economist, the country cannot put its bets on worker remittances this year as it used to do.
“There is a risk in this area (remittances) for us due to the fall in crude prices as well as the political tension in the region,” said Dr. de Silva. Worker remittances have been the top foreign income earner for the dollar hungry nation coming ahead of garments and tea export earnings combined.
In 2014 remittances topped US $ 7 billion, growing by 10 percent over the previous year. But during the eleven months to November 2015, these inflows grew by just 0.8 percent to US $ 6.4 billion.
Remittances earned amid much sweat and blood of the workers have always come to the help of the country’s ever expanding trade deficit and, buttressed the balance of payments in time of needs.
According to analysts, a possible reversal in worker remittances in 2016 will be the last thing the government would want.
Sri Lanka is set to face a tough year in 2016 with dim prospects for exports, foreign direct investments and foreign inflows amid tightening liquidity in international capital markets ahead of further monetary tightening by the United State’s Federal Reserve.
Last week Saudi Arabian government announced plans to cut spending, reform to energy subsidies and to raise revenues from taxes and privatization in a bid to shrink its record budget deficit due to the low oil prices.
These are highly political sensitive measures in Saudi which could have a significant impact on the disposable income of its people. However the Saudi’s Finance Ministry said any changes would aim to make energy use more efficient and conserve natural resources while minimizing the negative effects on lower and middle income Saudis. Sri Lanka’s Central Bank Governor, Arjuna Mahendran also recently pointed out the risk in over-relying on the remittance flows from the ME.
“About 50 percent of our remittances of US $ 7 dollars come from the Middle East. ISIS attacks are causing instability there,” he told a press conference last week.
However, the former AGM at Sri Lanka Bureau of Foreign Employment (SLBFE) and now an independent researcher and a consultant for labour migration, L. K. Ruhunage said, despite the economic and political tensions ME region, the prospects for demand for Sri Lanka’s low skileled and skilled labour is promising.
“Given their higher spending on infrastructure development to attract the world’s attention to the region as a commercially vibrant bloc, they need low and skilled labour and Sri Lankans stand at the front of their choice,” Ruhunage said. The latest data on migrant workers compiled by SLBFE available only up to the end of 2013 shows Saudi Arabia as the largest receiver of Sri Lanka migrant workers with 27.58 percent share followed by Qatar with 27.54 percent, U.A.E with 16.6 percent and Kuwait with 14.58 percent. In 2013, over 33 percent of migrant workers were housemaids or, the domestic housekeeping assistants, down from 42.14 percent in 2012.