The growth in official remittances during March despite the war in the Middle East was a huge solace to the nation’s economy, given the pressures felt by the external sector due to reduction in export income as well as the substantial decline in tourist receipts. According to the Central Bank (CB), official remittances rose by 17.5% to $ 814.8 million in March compared to a year ago. The development comes amidst workers’ remittances reaching a historically high figure of $ 8,076.2 million in 2025.
The crisis in the Middle East adversely affected Sri Lanka’s exports (both goods and services) apart from causing a considerable drop in both tourist arrivals as well as tourist receipts last month. Total exports reached $ 1,467.31 million during March, reflecting a Year-on-Year (YoY) decline of 5.2% compared to the corresponding period of last year. As per the EDB, exports to the Middle East had dropped by 48.31%, driven by the crisis in the region. On the other hand, tourism earnings declined sharply by 37% to $ 223.7 million while tourist arrivals in March dropped considerably by 20% from a year ago to 184,979, despite it being part of the peak season owing to disruption of aviation transit hubs in West Asia. In view of the negative developments in terms of tourist receipts and exports, the growth in remittances undoubtedly serves as a huge comfort to the economy.
Workers’ remittances have been a major component of Sri Lanka’s foreign currency earnings, providing a substantial comfort against the large trade deficits Sri Lanka is accustomed to and thus strengthening the safety of the economy. On average, Sri Lanka received around $ 7 billion during 2015 to 2020 from expatriate workers. However, during 2021 and 2022, remittances displayed a downward trend and in 2022 they plunged to a historical low of $ 3.8 billion, mainly due to the short-sighted foreign exchange rate regime maintained by the former Central Bank Governors W.D. Lakshman and Ajith Nivard Cabral. As the Monetary Authority maintained an unofficial peg of 200-203 rupees to a dollar from September 2021 to March 2022, the migrant workers switched to informal channels like Hawala that offered far more attractive rates than banks.
Employment in foreign countries has become an invaluable salvation to ambitious Sri Lankans who have been battered by decades of economic stagnation. Jobs in the Middle East have contributed towards the upward social mobility of numerous families in the country though the departure of mothers who have adolescent children causes disintegration and turmoil among households under certain circumstances. Historically, Sri Lankans tended to seek jobs in the Middle Eastern states like Saudi Arabia, Qatar, and the UAE, but in the recent past opportunities have arisen in countries like Romania, Poland, Japan, Israel, and South Korea too. Although blue-collar workers represented the overwhelming majority of foreign employees in the past, a considerable number of educated professionals too leave for overseas to seek high-paying jobs unlike in the bygone days.
It is estimated that around 1 million Sri Lankans work in West Asia, and their remittances offer a vital lifeline to their dependents back at home. Few weeks ago, an international media outlet ran a news story of a Sri Lankan expatriate worker based in Dubai, whose salary has been reduced due to the ongoing crisis, skipping his meals to save the required money to send money to his loved ones. Such enormous sacrifices together with increased departures for foreign jobs would have contributed towards the increase in remittances during March.
However, going forward, persistent turbulence in the Middle East could hinder the flow of remittances to the economy as 45% of remittances originate from Gulf states according to the Central Bank. Such a scenario could pose serious challenges to Sri Lanka’s fragile economic recovery in addition to causing considerable pressure on the external sector.