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Friday July 1st, 2022

Sri Lanka remittances down 61-pct in January 2022 amid parallel exchange rates

ECONOMYNEXT – Sri Lanka’s official remittances in January 2022 were down 61.6 percent from a year earlier to 259.2 million US dollars, central bank data showed, as overseas workers sent money through unofficial channels at a higher parallel exchange rate.

Sri Lanka is trying to enforce a peg at 200 to the US dollar, but money printed to keep interest rates low and exchange controls which come in the wake of liquidity injections have pushed the price in the unofficial market to around 248 to the US dollar, and the Hawala/Undiyal rate even higher.

As a result workers in the Middle East for example can get a higher rate.

Official remittances which were edging down as the economy opened, driving up credit started to fall even faster after August as a non-credible peg was strictly enformed.

Authorities are offering 10 rupees above the official 200 to the US dollar rate, of which at least 8 rupees is coming from the central bank itself.

Any liquidity injected by the central bank expands reserve money, triggers more pressure on the peg undermining its credibility further as the recipients spend the money on imports.

Bangladesh Central Bank which cut rates in July as the economy re-opened as seen parallel exchange rate widen as Undi rates rose up to December.
(Colombo/Feb25/2022)

Comments (1)

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  1. GEORGE STANLEY LIYANAPATHIRANA says:

    Wrong decisions at the Central bank and the government has led to the current situation where Sri Lankans living overseas have resorted to different methods of sending foreign currency to their families regularly. The government offers through local banks Rs.200 per dollar when the remitters and recipients here in Sri Lanka, are well aware that the dollar has a higher value through other ways. The end result is that overseas remittances through normal channels are falling daily and continue to be so until the Finance Minister and the those at the top, understands the severity of the problem and work out a plan to match the black market and offer much higher rate, for foreign currency remittances or float the Rupee. We have to move with the rest of the world and act what the majority of rest of the countries do in similar situations. They must get the World Bank support in this situation. A panel of top economists should be formed to address the situation beneficial to the country. I believe, along with promotion of Tourism, attractive rates for conversion of foreign currency, enhanced government support for the Export sector will help the current situation to some extent.

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Comments (1)

Your email address will not be published.

  1. GEORGE STANLEY LIYANAPATHIRANA says:

    Wrong decisions at the Central bank and the government has led to the current situation where Sri Lankans living overseas have resorted to different methods of sending foreign currency to their families regularly. The government offers through local banks Rs.200 per dollar when the remitters and recipients here in Sri Lanka, are well aware that the dollar has a higher value through other ways. The end result is that overseas remittances through normal channels are falling daily and continue to be so until the Finance Minister and the those at the top, understands the severity of the problem and work out a plan to match the black market and offer much higher rate, for foreign currency remittances or float the Rupee. We have to move with the rest of the world and act what the majority of rest of the countries do in similar situations. They must get the World Bank support in this situation. A panel of top economists should be formed to address the situation beneficial to the country. I believe, along with promotion of Tourism, attractive rates for conversion of foreign currency, enhanced government support for the Export sector will help the current situation to some extent.