Sri Lanka plans to incentivize remittances' flow through the formal channel

Sri Lanka has been working on a plan that would soon incentive overseas workers to send remittances through formal channels in a move that the government expects would boost its forex

Nov 11, 2021
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Sri Lanka (File)

Sri Lanka has been working on a plan that would soon incentive overseas workers to send remittances through formal channels in a move that the government expects would boost its forex. Currently, the country receives an annual average of $7 billion--a significant sum for forex-starved Sri Lanka-- in remittances.

The Central Bank on Wednesday said that they were in the process of taking steps to ensure that remittances reach their full potential in a manner that would be beneficial to the worker as well as to the country, reported Colobopage. 

Estimates suggest close to 1.5 million Sri Lankans are currently working abroad, mostly in the Middle East region. 

The new plan, the Central Bank of Sri Lanka (CBSL) said, would be applicable to only those people who remit their earnings to the country only through the formal banking system or any other transfer system channeled through the banking system. 

“Operational details of proposed incentive package will be informed to the public in due course, in consultation with relevant Government authorities and the banking sector,” the bank said. The incentives, it added, would be proportional to the amount remitted through the bank system. 

Importantly, the initiative comes at a time when the country has been going through one of its worst forex crises in recent decades. In September this year, the gross official reserves dropped to around $2.5 billion, registering a decline of almost 28 percent in comparison to August when it was around $3.5 billion. 

As the crisis intensified amid the Covid-slowdown and the almost closed tourism industry, the government placed a highly restrictive import regime to restrict dollar outflow. However, the situation lately became so bad that the government struggled to import essentials like fuel, food, fertilizer, and cement. 

Efforts are on to raise external financing through individual countries and global multilateral agencies. 

(SAM) 

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