Earnings from Lankan workers in Middle East continue to go downhill

Workers’ remittances, a key lifeline to the dollar hungry nation, recorded their second sharpest monthly decline in October 2017, delivering a significant blow to the US $ 82 billion economy, which is already grappling with a massive debt pile and an unsustainable current account deficit.

According the Central Bank data, the workers’ remittance in October fell 12.2 percent year-on-year (YOY)— only second to 17 percent YOY drop in September—to US $ 533 million.

On a cumulative basis, the workers’ remittances in the first 10 months of 2017 fell 7.9 percent YOY to US $ 5.5 billion.

“…workers’ remittances further declined, owing to adverse economic and geopolitical conditions prevailing in the Middle Eastern region,” the Central Bank said.

Prior to the current geo-political tumult in the region, Sri Lanka has been regularly receiving up to US $ 7 billion in remittance income annually, which is about 10 percent of the country’s gross domestic product (GDP).

Currently there are about two million Sri Lankans working abroad, mostly in blue-collar jobs. But the tightening labour market, stringent regulations and the rising employment income back home has put a lid on the number of people seeking employment abroad.

It was only recently the Central Bank Governor Dr. Indrajit Coomaraswamy told a presser that a temporary slowdown in remittances could even be a blessing in disguise at a time when the local industries find a shortage of workers in sectors such as construction and manufacturing.

Meanwhile tourism earnings also showed unimpressive growth in October, recording 1.3 percent YOY growth to US $ 262 million (provisional) and the cumulative earnings for the first 10 months stood at US $ 2.9 billion (provisional), up 2.7 percent YOY.

Remittances and tourism earnings buttress the current account of the balance of payment for a certain degree but Moody’s Investors Service last August forecast a higher deficit in the current account for this year.

“The large trade deficit is mainly offset by tourism receipts and, more significantly, remittances. While generally robust, these income flows fluctuate from year to year and leave a shortfall in the current account”, Moody’s.

The rating agency forecast Sri Lanka’s current account deficit to stretch further to 3.0 of the GDP in 2017 from the 2.4 percent in 2016 before becoming stable around 2.3 percent of GDP in 2018 and 2019.