4 May 2020 10:08 am
Worker remittances to Sri Lanka fell sharply in March setting forth in what could be the beginning of a prolonged slowdown in the crucial foreign exchange income, which acted for decades as a buffer against massive foreign outflows on imports and the country’s fragile balance of payment (BOP).
According to latest statistics compiled by the Central Bank, Sri Lanka has received remittance of US$ 492.1 million from its migrant workers in March, compared to US$ 571.4 million received in the same month in 2019.
The fall in income by 14 percent or US$ 80 million, though significant, may not be the worst compared to what could follow in the ensuing months when more than one third of the world, including the Middle East, was in lockdown to guard against the deadly COVID-19.
The lion’s share of Sri Lankan migrant workers is in Middle East and it has been recently reported that most of these workers had experienced pay cuts or were on no-pay leave since mid-March.
The month of March typically records the highest remittance income in a normal year, along with November and December as they are months prior to the two largest festive seasons in Sri Lanka.
According to Central Bank data, during the last five years, Sri Lanka has received on average US$ 633 million as remittances in the month of March.
By that measure, March 2020 receipts were way off.
Meanwhile, the March 2020 figure overshadowed the cumulative receipts for the first time as the remittance income in the first three months of the year slipped by 1.0 percent to US$ 1.6 billion compared to US$ 1.62 billion in the same period, a year ago.
The World Bank recently estimated the pandemic could impact remittance inflows to Sri Lanka by as much as 19 percent to US$ 5.4 billion in 2020 from US$ 6.7 billion in 2019. As the countries world over are slowly limping back to work, albeit with strict health guidelines, the severity of the crisis could dissipate during the second half of the year.
But it remains uncertain if the remittance income could catch up as companies and employers could cut part of their staff due to sub-optimal capacity and low incomes in the aftermath of the lockdowns.
Low crude oil prices for a protracted period of time could also pose massive challenges to Gulf region economies where a majority Sri Lankan migrants are employed.