Surge seen in remittance flows since rupiah float – Business News

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A sudden surge in remittances has been seen since the rupiah floated last Monday, the State People’s Bank, which is among the top two remittance collectors, said it is witnessing an influx of such inflows. .

The Central Bank floated the rupee last week after holding it for more than 6 months, allowing the currency to find its own value based on the forces of supply and demand.
The fixed exchange rate at Rs.199/203 per dollar became fertile ground for informal money changers who offered significantly higher conversion rates for dollars and other currencies outside the formal banking system.

This has prompted Sri Lankan migrants to repatriate their hard-earned money through informal channels such as Hawala and Undiyal. As a result, money sent through the formal banking system fell by 40% in January 2022 compared to a year ago.

Remittance income fell 61.6% to $259.2 million in January 2022 compared to the same month in 2021.

Although various mechanisms such as incentive schemes, mobile apps and crackdowns on informal money changers were deployed by the authorities, nothing worked in their favor as migrant workers continued to choose the informal channels for a better deal.

Now that the rupee has floated a week ago, it has found its own value based on market forces, negating any advantage it enjoyed at the
informal channels.

Telegraph transfer rates quoted by commercial banks after currency float reached levels of Rs.260-270.

This has encouraged migrants to use the formal banking channel more widely than before, according to Rajith Kodituwakku, managing director of
People’s Bank.

“PB Sri Lanka has seen a significant increase in workers’ remittances since the currency was allowed to float freely. Customers seem to prefer formal banking channels over informal means to return their money,” he said in a Twitter post this week.

Sri Lanka lost about 1.5 billion rupees or 23% in remittance income in 2021 compared to a year ago, as the country collected only US$5.5 billion, migrant workers being attracted through informal channels due to the artificial exchange rate maintained by the Central Bank for months.


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