Columns

Remittances of Sri Lankan migrant workers make significant contributions to our economy. Being the highest source of foreign earnings, they are the crucial part of our balance of payments. Besides, they enhance livelihoods of poor households and enable people to begin small businesses.

However, there are severe costs and consequences for our economy and society. These include the shortage of skilled personnel, disruption of family lives and the weakening of the country’s development capacity.

Foreign earnings

The importance of remittances to the Sri Lankan economy is well known. In recent years, remittances have exceeded the earnings from tourism and merchandise exports. Remittances are the mainstay of our balance of payments.

Furthermore, remittances are net earnings with no import content, unlike merchandise exports and tourist earnings.

West Asia

Over one half of worker remittances are from West Asian countries such as Saudi Arabia, the United Arab Emirates, Qatar, Oman, Kuwait, Bahrain and Israel. They account for about one half of the total remittances.

Other countries

Remittances also come from Sri Lankan migrant workers in South Korea, Malaysia, Singapore, Hong Kong, some European countries and North America. These are the main sources of foreign exchange for the balance of payments.

Poverty alleviation

Apart from the valuable contribution to the foreign reserves, remittances make an important contribution to the livelihoods of poor households around the country, and, as a result, poverty is reduced. There is hardly any village where households do not receive regular remittances from their family members working abroad. Urban households too receive regular income from family members gone overseas for jobs.

Tamil diaspora

The Northern and Eastern provinces also receive a significant amount of remittances from the large Tamil diaspora. As a result, lifestyles have been modernised in the remittance-dependent northern peninsula.

Informal channels

The actual remittances to the country are larger than the official figures, as a significant amount of money is remitted through informal channels. The best-known means of sending money is the Hawaala system. Therefore, the contribution of remittances to the livelihoods and economy is much higher than indicated by the official figures.

There is no information about how much money is sent through the informal channels, but there is little doubt that they are significantly large.

Small enterprises

Remittances have also enabled many to begin small business ventures and small industries, like services like trishaws, boutiques, restaurants and hotels.

Incomes of the poor

No doubt remittances have made a significant contribution to the macroeconomy, as well as the incomes of poor households. Our gross national income and per capita income are much higher than the official estimates.

Other side

The other side of the story is, however, depressing. Children left behind without the care of parents or a single parent have been neglected. Marriages have been disrupted with adverse consequences. These social costs are difficult to assess, but they have been documented in studies undertaken by research institutions.

Adverse consequences

Undoubtedly, remittances are the main strength of the country’s external finances. They also contribute towards the alleviation of poverty and help bring investments for small enterprises. There is hardly a village that does not receive remittances from workers abroad. This is especially so in the North and East.

However, there are social costs. Small children are left behind with a single parent or others due to the breakup of families.

Skilled workmen like carpenters and electricians are scarce.

There is also a large exodus of scientists, engineers and medical doctors. Their exodus is weakening the country’s developmental capacity and social welfare, especially of the increasing ageing population.

A study by the academics of the University of Peradeniya revealed that science graduates of all universities in the country aspired to seek foreign jobs. This brain drain can have serious repercussions on the country’s economic development.

Concluding reflection

In as much as there are substantial benefits to the country from remittances, the impact on the country’s long-term economic development could be a weakening of the country’s development capacity.