New Nation Report :
With foreign exchange reserves falling to $2.36 billion in January, the Sri Lanka is experiencing its worst financial crisis in years according to Reuters.
Migrant worker remittances, a crucial source of foreign exchange in Sri Lanka, fell to a 10-year low of $5.49 billion in 2021, according to central bank data, as the country’s trade deficit worsened and imports increased.
The dip, according to Verité Research, a think tank located in Colombo, is likely due to the central bank’s unofficial peg of 200-203 Sri Lanka rupees to the dollar since September.
The rupee, on the other hand, is trading at approximately 250 per dollar through unofficial channels, forcing many migrant workers to send money through the informal “hawala” system, which avoids traceable bank transactions.
According to a cabinet press briefing on Tuesday, March 8, the Sri Lankan government has approved a plan to enhance the present incentive allowance granted to Sri Lankan overseas workers who transfer US dollars through licensed banks and other legitimate channels.
During the press conference, it was revealed that the central bank will pay 38 rupees (0.17 USD) for each dollar sent. The central bank had previously paid 10 rupees (0.04 dollars) for each dollar sent to Sri Lanka.
Sri Lankan migrants used to send roughly $7 to $8 billion in remittances to the country each year, but that figure decreased by nearly 2.5 billion dollars in 2021 when the government set the dollar at 200 rupees.
The decision to increase the incentive allowance was made in order to encourage Sri Lankans working overseas to transmit money via official methods.
After devaluing the rupee on Monday, the central bank declared on Tuesday afternoon that the official buying rate of one US dollar on March 8 was 225.20 rupees, while the selling rate was 229.99 rupees.
This year, Sri Lanka must repay approximately $4 billion in debt, including a $1 billion foreign sovereign bond due in July.
Even as it works to stabilize the economy following the Covid-19 outbreak, the administration thinks that an increase in remittances and tourism would assist to prop up declining reserves. find out more
Sri Lanka’s trade imbalance increased to $1.09 billion in December 2021, up from $562 million the previous year, according to the central bank.
Exports jumped 19.9% year on year to $1.16 billion in December 2021, while imports increased 46.8% to $2.24 billion over the same period, according to the central bank.
