- April remittance income at $249m, down 52% despite 80% rupiah depreciation
- Migrant workers continue to remit money through informal channels in search of higher rates
- Cumulative remittance income in the first 4 months down 57% to US$1.03 billion
Migrant workers do not seem to have understood their duty at a time of severe economic catastrophe engulfing their homeland as they continue to send their earnings through informal moneychangers, seeking higher conversion rates than those paid by banks.
Data showed workers’ remittances in April were just a fraction of what they sent a year ago, as excessive greed appears to have outstripped their obligation if they are serious about helping their country and their fellow citizens who are on the brink of starvation without access to food, cooking gas, fuel and electricity.
Even after an 80% depreciation in the value of the rupee against the dollar since March 7, migrants sent only US$248.9m in remittances in April compared to US$518.8m US dollars repatriated in the same month in 2021, a sharp drop of 52%.
With April inflows, on a cumulative basis, Sri Lanka received $1,031.5 million in the first four months from worker remittances, compared to $2,385.8 million in the corresponding period in 2021, registering a fall of 56.8%.
Sri Lanka typically receives US$7.0 billion in remittances, and in 2020 the country received US$7.1 billion due to the hibernation of informal money changers as a result of the pandemic.
But as Sri Lanka’s currency problems escalated in June last year and the Central Bank stuck to an unrealistic exchange rate, migrant workers chose the informal money changers, who had surfaced, rather than the banks.
If current trends continue, Sri Lanka is unlikely to receive even half of its typical annual remittances in 2022, plunging the country into a new economic chasm.
However, the Central Bank’s crackdown on payments through open accounts from May 20 is expected to redirect those who continue to use informal channels such as Undiyal and Hawala to formal ones.
Migrant workers now receive around 360 rupees to the dollar from formal banking channels, compared to 200 rupees received until March 7, when the rupee float came into effect. When the rupee was fixed at around 200 to the dollar, migrants obtained around 240 to 260 rupees to the dollar through informal channels.
However, the fall in April reflects the fact that they continue to seek higher rates, beyond the banks’ offer of Rs.360 from informal channels. Therefore, demands and pleas from authorities, old and new, as to why migrants should use formal banking channels to repatriate their earnings have not yielded the expected results.
A complete crackdown on informal channels, potentially via the recent ban on open accounts, could deal a blow to currency collectors as they will find themselves with no demand to sell their foreign currency in the absence of demand from importers, as all payments from importers , except in cases of exporters must go through letters of credit. The Central Bank, in conjunction with the Treasury, is currently drafting laws to catch those who hoard currency in the form of currency without taking it to the banks.