Supporting migrant workers
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Thankfully, the government is not touching the remittances of migrant workers and not forcing them to convert these remittances to rupees, in accordance with recent guidelines for exporters and service providers to convert their foreign earnings within one month of receiving the proceeds. Or so, the Central Bank promises.Even though most of the foreign currency sent back home by migrants is converted to rupees to sustain their families, while the breadwinners (often female domestic workers) are abroad, there is also a category of professional migrant workers who keep some amount in dollar savings or fixed deposits. And there is a principle involved, in that migrant workers should be allowed, if needed, to keep their money in foreign currency.
When the Central Bank announced regulations on October 29 enforcing the compulsory conversion of foreign currency earnings within a month, there were fears that they would also apply to remittances by low-skilled and professional categories of migrant workers, even though the bank statement said migrant workers would be exempted.
However, those calling the Central Bank’s Foreign Remittances Facilitation Department have been told that the new regulations won’t affect remittances of migrant workers, NRFC and RFC (foreign currency account holders). “No, remittances of migrant workers and NRFC account holders won’t be affected,” an official at this new department, told one caller.
That is the case at present but whether the Central Bank will tap into this resource in the future remains to be seen as the country struggles to meet import costs with dwindling foreign exchange reserves and reports that some government-to-government credit-lines to secure foreign exchange are unlikely to work.
The creation of a new department, for the first time, is to monitor remittances and discourage Sri Lankan expatriate workers from transferring their foreign currency earnings through unofficial channels (the ‘hawala’ system), a segment which the Central Bank is keen to tap.
For the moment, however, the Central Bank has done the right thing in not tapping into remittances which fetch an average US$7 billion a year, the highest foreign exchange earner for the country.
In another move to encourage migrant workers to use official banking channels, the Central Bank on Wednesday said the government and the bank are working on a host of new benefits for Sri Lankan expatriate workers but asserted these benefits are only for remittances coming through established sources.
It said various government stakeholders are working together to introduce an incentive package for migrant workers, which includes pension/superannuation benefits, accident/life insurance benefits, banking facilities including low-interest loans for housing and/or self-employment on return to Sri Lanka and enhanced duty-free concessions.
Taking a breather from the column, I walked towards the kitchen where a hot jug of tea had been prepared by Kussi Amma Sera, who had returned – along with Serapina and Mabel Rasthiyadu – after their week-long sojourn in their respective villages. And it was nice to listen to their conversation under the margosa tree, where they had gathered on this Thursday morning.
“Mama paththare kiyewwa aanduwa hadanawa kiyala meda peradiga rassawal karana aya aapahu ewana salli paalanaya karanna. Eh wede nam varadi (I read in the newspapers about the government trying to control remittances of migrant workers. If that is the case, it’s not the right thing to do),” said Kussi Amma Sera.
“Mama hithanne ne eka aththa kiyala. Wena waarthavak thibba eh kattiya aapahu ewana salli walata prashnayak athi-wenne ne kiyala (“I don’t think that’s correct because there was another report saying migrant workers’ remittances won’t be affected),” noted Serapina.
“Monawa wunath, aanduwa batahira aasiyawe weda karana ape sahodara sahodariyanta prathilaba denna oney. Egollo me ratata vishala dayakathwayak pennanawa-ne (Whatever it is, the government should provide more benefits to our brothers and sisters working in West Asia as they are making a huge contribution to the country),” said Mabel Rasthiyadu.
As I sipped my tea and watched them chatting, the phone rang. It was Arthika, my economist friend also known as good-for-nothing Somey, on the line.
“I say, will these new regulations concerning foreign earnings be good for the economy?” he asked. “Well, whether we like it or not, the country is trapped without sufficient foreign exchange to meet imports and the authorities are resorting to desperate measures to draw in more non-debt foreign currency,” I said.
“But won’t exporters be unhappy to convert all their earnings to rupees after setting off funds for import of raw materials and other items, salaries, etc? Earlier, they only had to convert 25 percent of the earnings and now it’s all what they earn (after setting aside costs),” he said.
“As I said, these are desperate measures and more measures may come in the near future as we head down an uncertain road of foreign exchange shortages,” I said, adding: “You never know what the next steps in rounding up foreign exchange would be.”
The shortage of foreign exchange has been largely exacerbated by the loss of tourism earnings which fell to just $700 million in 2020 due to the pandemic-related closure of the airport, from a peak of $4.4 billion in 2018, while resulting in a drop in 2019 to $3.6 billion (owing to subdued tourism demand after the Easter Sunday terror attacks). Tourism was the third largest foreign currency earner after migrant remittances and garments which fell to $4.4 billion last year from $5.6 billion in 2019.
With tourism earnings dwindling, the authorities have been groping in the dark on the measures to adopt to increase non-debt foreign inflows. Foreign direct investment has also not brought in the required amounts and sudden measures like the latest round of Central Bank regulations trigger confusion and uncertainty in not only the minds of exporters but also professional service providers including IT companies, BPOs and legal service providers among other professional categories that earn foreign exchange, operating from Sri Lanka.
At this point, as I paused to drink some water, the phone rang again. It was an accountant friend of mine. “I say, will I be forced to convert my foreign exchange earnings which are in fixed deposits, under these new regulations?” he asked. “I don’t think so. But you should ask your banker,” I said.
“I asked my banker but he is also not sure and hoped that there would be more clarity on these regulations in the coming weeks,” he added.
As I wound up my column, Kussi Amma Sera walked in with my second mug of tea asking: “Heta aya-waya apita sahanayak deida (Will the budget tomorrow give us some relief”)?
“Mama balaporoththu wenawa (I hope so),” I said, reflecting on the challenging times the government is facing with the rising cost of living, queues for essential goods and protests by farmers and teachers.