Worker remittances show weakness intensifying external vulnerabilities

„June worker remittances down 11.4% to US $ 254mn „The consecutive second month to witness weaker remittances „Remittance earnings in first half down 0.9% to 3.6bn

Worker remittances to Sri Lanka dropped by 11.4 percent to US $ 524 million in June compared to the same month in 2017, as the earnings from the largest foreign exchange earning source to the country continued to show signs of weakness.

June marked the fall in crucial foreign income for the second month in a row as in May such incomes declined by 3.4 percent year-on-year (YOY) to US $ 580 million, after two months of growth.

On average, Sri Lanka receives US $ 7.0 billion from worker remittances for a year.

Worker remittances to Sri Lanka has been erratic since the Gulf countries curtailed its quota for foreign employment after the region suffered from falling oil prices for nearly three years.

However, as the global oil prices have now steadied around mid US $ 70 a barrel, Gulf economies are slowly rebounding.

But the recent crisis in the Gulf region caused by the oil glut upended their economies as their new leaders are seen taking rapid steps to diversify their economies while granting more social freedom to citizens, which puts more of their own citizens to work.

Majority of the Sri Lankan migrant worker population works in the Gulf as either semi-skilled workers or domestic aides. The economic diversification may open up more jobs for more Sri Lankan skilled worker categories.

For the first six months in 2018, worker remittances recorded a marginal 0.9 percent increase to US $ 3.6 billion over the same period last year.

Meanwhile, the tourism trade generated an estimated income of US $ 272 million in June and a cumulative earning of US $ 2.2 billion for the first six months.

The June earnings marked a slight uptick compared to May where the country earned US $ 240 million from tourism.

Meanwhile, the tourist arrivals increased by 19 percent in June 2018 to 146,828 as a result of healthy growth in the number of tourists arriving from India, Australia, Saudi Arabia and China in comparison to June 2017.

Total tourist arrivals during the first half of 2018 stood at 1,164,647, a 15.3 percent increase over the first half of 2017.

As worker remittances and tourism earnings amid other service inflows bridge much of the deficit created by the trade account, Sri Lanka as a twin deficit economy—in its current account and the budget— remains highly vulnerable to international capital flows, currency depreciation and outflows from investments in stocks and bonds.

Sri Lankan rupee plunged into a fresh low on Monday as it hit Rs.161.05/20 a US dollar. The rupee value has declined by 0.9 percent so far this month, 5.0 percent yearto-date and 21 percent during the last 3.5 years.