23/02/2021

How Sri Lankan remittances are defying COVID-19 | East Asia Forum

The economic slowdown and increased uncertainty in Sri Lanka and abroad may have also diverted
informal remittances towards formal channels. Informal remittances to Sri Lanka are signi cant and include
Undial and Hawala-type networks, as well as hand carrying. Remittances through these Undial and Hawalatype networks are informal and cash does not cross borders, relying on retail establishments to collect
remittances overseas for pay out in Sri Lanka through money already in the country.
Similarly, limited travel during the pandemic and the mandatory 14-day quarantine made physical carry of
cash di cult. These factors are likely to have shifted previously informal remittances into formal channels,
leading to an increase in o cial remittances.
While these two reasons may have turned around the declining trend in remittances to Sri Lanka during the
second quarter of 2020, they fall short of justifying the record-breaking streak in the next quarter, when
worker departures were low and returns were high. These factors point towards alternative explanations.
Apart from regular remitters, less frequent and less reliable remitters, who transfer counter-cyclically
during a crisis for altruistic reasons, also likely contributed. Sri Lanka traditionally receives nearly 50 per
cent of its remittances from regions outside the Middle East and a recent study by IPS found that
permanent migrants in Western countries were more secure in their jobs during the pandemic, making
them well-placed to send funds to Sri Lanka during this time of di culty.
An increase in remittances appears to be driven by Sri Lankans abroad who are less a ected by the
pandemic. Similarly, there were also new remitters who took advantage of the incentives o ered by the
Central Bank of Sri Lanka through Special Deposit Accounts (SDA).
The pandemic resulted in many migrant workers being laid o in the Middle East, where most of Sri Lanka’s
migrant workers are based. Over 18 million full-time jobs were lost in this region between March and
September 2020. Most laid-o workers had already accumulated savings to bring on their return and many
laid-o skilled and professional workers received terminal employment bene ts such as gratuity. Unlike in a
normal year, in 2020 much of these terminal employment bene ts and accumulated savings were remitted.
The World Bank projected low and middle‐income countries would experience a gradual but more
prolonged decline in remittances spanning from 2020 to 2021, and expected remittances to Sri Lanka to
decline by 9 per cent in 2020. While data on outmigration and return migration has not yet settled, monthly
remittances data up to November indicate that Sri Lanka is unlikely to su er a drastic decline as projected.
Since remittances in December tend to be large, the overall gure for 2020 will likely be an increase from
2019.
Bilesha Weeraratne is a Research Fellow and the Head of Migration and Urbanization Policy Research at the
Institute of Policy Studies of Sri Lanka.

https://www.eastasiaforum.org/2021/01/28/how-sri-lankan-remittances-are-defying-covid-19/

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