Drop in remittance from West Asia hurts economy

The Sri Lankan economy has suffered a severe blow from the Qatar-Gulf crisis and low oil prices following a drastic drop in remittances from Lankan migrant workers in West Asia.

Experts pointed out that there had been a significant slowdown in workers’ remittances in June 2017 with a 13.5 per cent reduction on a year-on-year basis amounting to USD 557.6 million during the month.

Central Bank economists said the continued decline in workers’ remittances could be attributed to the adverse economic and geopolitical conditions prevailing in the Western Asian region.

Consequently, inflows from workers’ remittances declined by 7.2 per cent on a cumulative basis to USD 3,354.7 million during the first half of this year in comparison to the corresponding period of last year.

Economic analysts predict an economic crisis here due to the decline in foreign remittances in the face of ever increasing import expenditure.

In comparison to the first half of last year, the import expenditure of the country increased from USD 9,321 million to USD 10,151 million during the first half of this year. As a result, the trade deficit, too, had increased by 8.9 per cent during the first half of this year, Central Bank sources said.

The increase in import expenditure was mainly due to the rising prices of fuel, rice and gold imports, sources said.

According to the World Bank sources migrant workers’ remittances to south Asia fell 6.4 per cent last year after years of steady increases.

Remittances to India slumped 8.9 per cent in 2016 — the second consecutive year of decline — to USD 62.7bn, down from USD 72bn two years earlier.