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Private remittances into Sri Lanka from migrant workers and others have soared in 2007 so far thereby having a positive effect on the overall Balance of Payments.

Central Bank said yesterday that private remittances grew by a whopping 19% to $ 1.53 billion in the first seven months of this year. The average inflows have been over US$ 200 million.
The Bank said higher inflow has helped contain the current account deficit. Private remittances grew by 18.4% to $ 1.3 b during the first half of 2007
This together with robust exports have also helped Sri Lanka post a balance of payments surplus of US$ 151 million and the gross official reserves stood at US dollars 2,681 million (3.0 months of imports) by end July 2007.

As at end first half (i.e. June 2007), the overall balance of payments registered a surplus of $ 192 m and the gross official reserves stood at US dollars 2,719 million (3.1 months of imports).

In 2006, worker remittances rose by 21.2% to a record US$ 2.3 billion, despite the number of migrant workers leaving for foreign employment declining by 14.4% to 201,143.

CB in its 2006 Annual Report noted that worker remittances have become a major source of foreign inflows to the country. Remittances began to grow at a higher rate during 2005 and 2006 due to high oil income in oil producing countries coupled with the impact from the aftermath of the Tsunami devastation.

These increased inflows helped to finance around 70 per cent of trade deficits in 2005 and 2006 and to contain current account deficits. In view of the economic importance of worker remittances the Central Bank took several new initiatives during 2006 to enhance remittances further. Several measures were initiated in 2006 jointly by the Central Bank, Commercial Banks, Association of Licensed Foreign Employment Agencies (ALFEA) and Sri Lanka Bureau of Foreign Employment (SLBFE) to identify problems faced by the migrant workers in remitting money and problems faced by banks in mobilising remittances. A major problem faced by migrant workers was the lack ofawareness on benefits provided by Commercial Banks.

Thus, with the Central Bank advice, SLBFE and foreign employment agencies began to educate both Sri Lankan migrants in labour hiring countries, their beneficiaries in Sri Lanka as well as would be migrants on facilities offered by Commercial Banks and benefits available to them.
Meanwhile, recognising the economic importance of worker remittances, the government appointed a High- Level Committee to study issues and recommend appropriate policies and mechanisms to encourage migrant workers to use formal channels for remittances.

The need for various other measures was also felt strongly. These include language training, training on handling of electronic household items, diversifying employment markets, arrangements for long-term employment contracts and direct government involvement in securing foreign employment for Sri Lankans. Efforts should also be directed towards encouraging labour hiring countries in East Asia and the Middle East to increase average wages of the migrants, the Central Bank said. In addition, creating awareness on availability of duty free allowances to purchase goods from duty free shops in Sri Lanka, extension of the duration of duty free allowance were also felt necessary to enhance remittances by migrant workers.

Linking incentives such as duty free allowances, housing loans and loan facilities to commence self-employment projects on return to the country, etc. to the amount remitted would further encourage remittances through the banking channels. Provision of pre-departure loan facilities to potential migrants with agreements to remit money through the particular banks would also encourage remittances through banking channels. Meanwhile, the foreign employment agencies should be incentivised by way of recognition of their contribution. Difficulties faced by commercial banks such as visas for operating in host countries need to be resolved. “This is vital since the efforts of commercial banks in channelling remittances through official means not only enhances remittances flows to the country, but also prevent those funds being utilised for illegal activities including terrorist financing,” the Bank said.

To further enhance this process, domestic banks could also use the widespread postal network and mobile telephone technology to deliver the remittances fast, while sharing their payment infrastructures for better delivery of services to the beneficiaries. Since the remittances are directly linked to income of migrant workers, there should be a gradual increase in the skill levels of migrants leaving Sri Lanka, the Central Bank said.