ECONOMYNEXT – Growth in Sri Lanka’s remittances coming through official channels slowed to a 16-month low in January after it showed more than 80 percent following the central bank’s improved exchange rate policy.
The year-on-year remittance growth was 11.4 percent in January, the central bank data showed.
Sri Lanka saw less than the January growth in monthly remittances in September 2022 when it showed a gain of 1.7 percent. Since then Sri Lanka witnessed a booming remittance growth.
In January 2024, remittances went up to $487.6 million from $437.5 million in the same month a year earlier.
The remittances, Sri Lanka’s top foreign exchange earner, dropped to less than $250 million a month in early 2022 when the island nation’s economy saw a parallel exchange rate amid booming hawala and undiyal measures which foreign workers switched to send money at a higher exchange rate.
The remittances jumped 57 percent to its four-year high of $5.97 billion in 2023, from $3.8 billion a year earlier.
Sri Lanka’s external sector started to stabilize in September 2022, when the central bank started to run balance of payments surpluses after ending money printing to sterilize interventions made with Indian Asian Clearing Union money.
Worker remittances coming through official channels fell in 2021 the local banking system could not pay the money at the official rate as money was printed to sterilize interventions to keep market interest rates down. That triggered parallel exchange rates, which were settled outside the formal banking system.
From April 2022 rates were raised by unprecedented levels, slowing credit and the need to print money to keep rates down. (Colombo/Feb 9/2024)