Lankan migrants urged to send remittances thro’ official channels
The government is urging Sri Lankan migrant workers to send remittances through official channels instead of unofficial routes, enticing them with a wide range of incentives. Some 30 to 40 per cent of foreign exchange is routed through the ‘illegal’ system, officials said.
A senior Finance Ministry official said the ministry will issue a directive to commercial banks to offer more attractive service charges combined with a set of banking products and incentives to migrants based on the volume of their deposits and to attract more foreign remittances.
Remittances doesn’t come in the form of foreign exchange when it is ‘sold’ abroad to an agent who gives it in Sri Lankan rupees to the migrant or his dependants in Sri Lanka, he revealed.
These migrants must be made aware of the full benefits of retaining their earning in dollars even if they need to draw on the account regularly, he added.
These proposals are being considered to raise foreign exchange reserves as the country is losing foreign exchange amounting to US$ 2-3 billion annually.
This year, foreign remittances to Sri Lanka are expected to reach the US$10 billion mark by the end of this year from $6 billion last year.
A retired senior banker has submitted a proposal to the president, who is also the finance minister, on ways of attracting $1 billion into the formal banking system from the informal system through a strategically marketed lottery by the Central Bank or the Treasury. More than two millions Sri Lankans work abroad and average annual earnings are estimated at around $8.7 billion.
Even after excluding 20 per cent of this (US$ 1.74 billion) on personal expenditure in their respective countries, Sri Lanka should get at least US$ 6.96 billion. “But we have received only US$ 4.1 billion in 2010. Where did US$ 2.86 billion go? Consequently, this further verifies the estimation made by the Central Bank that 30 to 40 percent of foreign exchange is leaking into the informal system,” retired People’s Bank Deputy General Manager Wasantha De Silva, who made the proposal, told the Business Times. “This figure could be much more in 2011, but there is no way of calculating the exact figure due to the non availability of official statistics. This amount is sufficient to finance the balance of payments deficit, and create a surplus to contribute significantly to the country’s development,” De Silva, with over 40 years of banking experience, said. “In addition, looking at the trends in real estate markets, remittances from the Sri Lankan Diaspora via informal channels could be around US$ 500 million. Moreover, another US$ 100 million is leaking into the informal sector through activities connected to tourism,” he added.
He said due to these large amounts of foreign exchange cheaply available in black market, there is a thriving nexus between importers to under-invoice their import bills to escape paying due taxes, amounting to more than Rs. 100 billion each year. This is a huge loss to the state coffers. “The foreign exchange offenders caught every year in the customs’ net is only a fraction and indicates only the tip of the iceberg,” De Silva said. He said to overcome this situation, the only way out is to provide monetary incentives to migrant/expatriate workers who depend exclusively on the banking system.
He said that he pioneered a similar scheme for the People’s Bank in 2005 which brought in additional foreign exchange amounting to Rs. 1.8 billion in a single year.
According to the structure of this proposed lottery, every unit of Rs. 10, 000 received in foreign exchange or foreign currency exchanged over a bank counter will get one winning opportunity (a ticket).
Therefore, more money received will earn more winning opportunities for the receiver.
This lottery will pay Rs. 50 million as price money monthly, plus an annual grand price of Rs. 500 million for Sri Lankans who receive foreign exchange and transfer that to local cash, he added.
Tickets for the draw would also be issued when travellers cheques, foreign currency notes, foreign drafts and cheques are encashed on arrival at the Bandaranaike International Airport, Katunayake, he said.
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