Features
Worker remittance inflows lose steam
Why they are important and how to revive them
By Charith Gamage
In a period of decreasing reserves and foreign exchange shortages, migrant worker remittances had once been a welcome stream of income for Sri Lanka in fulfilling its foreign exchange shortfalls. With the recent sharp fall in remittances, the ongoing situation is causing chaos in the island nation’s mission to increase foreign exchange revenues. The following is an examination of how remittances aided Sri Lanka in the past, the causes of the sudden drop, and most importantly, how to keep remittances flowing as before.
“That’s a nice set of coloured pencils; where did you buy it?” This is not an uncommon question a Sri Lankan student would ask their classmate after noticing that they have a school accessory not commonly available in Sri Lanka. The friend explains that it wasn’t bought from a local shop but that it has instead been sent by a parent working abroad. Although it is a trivial conversation at school, it reveals a unique segment in the Sri Lankan economy.
Nearly 1.5 million of the country’s labour force, ranging from unskilled to skilled and professional, migrate for employment purposes. These workers frequently contact their families and send home part of their earnings and occasional goods. These remittances, that trickle down to the larger economy, have been a vibrant component that balances out the island nation’s foreign exchange position in respect to the rest of the world.
At a time when the external sector is confronted with daunting challenges such as depleting foreign exchange reserves and a stumbling dollar-rupee exchange rate, there has recently been a sharp drop in remittances, making the efforts to get on top of the country’s forex crunch an uphill battle. As of October 2021, Sri Lanka’s remittances receipts have dropped 14 percent compared with the respective period of 2020. This divergence has become increasingly acute in recent months, with inward remittances in September and October 2021 falling sharply to USD 353 and 317 million, respectively, the lowest levels for both months since 2010 and 2009. (Data sources: CBSL historical data and the provisional figures mentioned in the institution’s weekly reports; the November and December 2021 figures were not known at the time of writing this article)
Why are remittances important?
Before explaining the reasons behind the recent shortfall, a simple current account analysis, which summarises what countries spend and take in from abroad, provides a more comprehensive picture of the importance of this vital economic undercurrent.
The current account (CA) of countries like Sri Lanka can be written as CA = (X-M) + NI + NT. Where (X-M) is the trade deficit or the gap between the country’s exports and imports (of goods and services), NI denotes net income, and NT indicates net transfers, of which remittances are a part. Remittances have been a lifesaver for decades, to fill the country’s persistent trade deficit and negative net income due to interest payments on foreign loans. Without this support, the country has to find other means, such as additional foreign borrowings, to fill the gap.
Figure 1, excluding 2021 data, shows that the flow of remittances has reached a tipping point in the mid-2000s and peaked around 2014, growing slowly since the 1990s. After this, it contributed roughly USD 7 billion per year from 2015 to 2020.

Figure 1
The figure also shows (X-M) plus NI and remittances as a percentage of (X-M) plus NI as separate series over the past two decades. One of the notable facts is that with the improved remittances flow, the widening trade deficit plus negative net income has been steadily supported by around 80 percent since 2014. Therefore, the recent remittances drop is a massive blow for the island nation, primarily in balancing its higher imports over exports (financing the deficit in the trade account).
What happened in 2021?
The South Asian region is a good proxy for analysing Sri Lanka’s remittances dynamics in 2021 to determine if this is a regional issue. First and foremost, is the remittances drop a common issue in the region? The answer is not quite so. The World Bank expects the region’s remittances to grow by eight percent in 2021 compared with the previous year, with key players India, Bangladesh and Pakistan earning more than they did in 2020 (https://www.worldbank.org/en/news/press-release/2021/11/17/remittance-flows-register-robust-7-3-percent-growth-in-2021).

Figure 2
By comparison, Sri Lanka’s most recent remittances dynamics seem quite different from this regional theme. As Figure 2 shows, since May 2021, there has been an apparent divergence from its remittances flows compared with the corresponding periods of the previous years, indicating that remittances have entered a rocky road. Some explanations suggest that the overvalued formal dollar-rupee exchange rate provides remittances with a lower value than the informal channels; hence, remitters use informal channels such as the ‘Hawala’ or ‘Undiyal’ system, which offers them higher rates. (U. Jayasinghe. Reuters. December 6, 2021. https://www.reuters.com/markets/currencies/why-does-sri-lanka-want-migrant-workers-remit-funds-via-banking-channels-2021-12-06/). Those systems operate so that when workers hand over dollars to a middleman in their host country, the recipient in their home country can withdraw an equal amount of rupees through another agent. Consequently, this causes those remittances to bypass the formal banking system and be unaccounted for, and perhaps may not even be received in Sri Lanka.
Although this might be one of the reasons, the amount lost through the official channels appears to be greater than what studies reveal; for example, some studies show a three percent decrease from formal channels for a 10 percent rise in black market premium. Suggesting that there could be other reasons, such as official channel users restricting transfers in the belief that the rate differential in parallel markets is an implicit tax on them.
Consequently, it seems there are two tasks to fulfil in order to rectify the remittances flow:
(i) shifting informal channel users back to a formal banking channel
(ii) encouraging those who might have used formal channels and limited remittances to remit more.
The country’s ongoing actions, such as offering greater (premium) exchange rates to remitters and cracking down on illegitimate channels, seem to target shifting informal channel users back to a formal banking channel. However, it is important to remember that whenever there is a higher price for dollars outside the formal system, senders are likely to hunt for loopholes, reducing the effectiveness of the efforts.
As a result, these initiatives should be better paired with strategies that motivate workers themselves to use official channels and send more, rather than making them feel they should accept a lower price for their hard-earned money. To better design these policies, it is imperative to find out what motivates them to send money.
Other factors affecting remittances
Although an altruistic motive could be one reason migrant workers remit money, studies show (for example an Indian study by P. Jijin, et al. Macroeconomic determinants of remittances to India. Econ Change Restruct. [2021]) that it is an investment motive that motivates senders to remit money (https://link.springer.com/article/10.1007/s10644-021-09347-3). Investment motive could be more pronounced among seasoned workers willing to shift their savings in bulk for investments or start businesses for the family. These flows are due to their overall confidence in the home country economy and its ease of doing business, including fewer restrictions and regulations imposed on their goals.
Over the past decade, Sri Lanka’s highest percentage increases in remittances, 24 percent and 25 percent occurred respectively in 2010 and 2011, following the boost in confidence in the economy after the end of the country’s 30 year-long civil war in 2009. This shows how these flows are intertwined with better economic outlooks.
This idea is supported by Abbas, Masood, and Sakhawat (2017) in a Pakistani research study spanning from 1972 to 2012, who show that financial and political determinants and variables such as stable macroeconomic conditions influence increased remittance flows (https://www.sciencedirect.com/science/article/abs/pii/S0161893817300248).
How to best manage remittances flow
Restoring remittances to previous levels is a critical challenge for Sri Lanka since it provides a lifeline to the economy in contrast to high-cost international borrowings. Studies show that, in most countries, the black market and the share of remittances flowing through it tend to feed each other; therefore, policies that bring remittances back to the formal channels would automatically shrink the black market as well.
Rather than predetermining the premium, authorities can identify the sender’s switching point between the informal and formal channels. From this, they can identify the level of relaxation on the exchange rate and the exact premium for remitters for a shorter period, for effective absorption of the parallel markets.
Given the disadvantages of the black market, such as lack of or no legal protection, lack of transparency, and the possibility of scams, there is no need to offer a stark contrast between the two markets to entice people to switch back. But, sufficient incentives need to be offered so that they do not feel they are penalised for using the formal channels.
In addition, since remittances are linked to investment intent, another front should encourage them to send more money home and through formal channels. It is important to build a network and boost their confidence by relaxing restrictions on them, providing investment opportunities and business guides for entrepreneurship, including credit and facilities to import machinery at concessional rates. Providing a robust safety net for their loved ones to help them out during the turbulent times of global economies is also essential. Overall, to help the country smooth out these flows, more diplomacy and a win-win situation for workers abroad seem to be key in harnessing effective outcomes.
Finally, given the procyclicality (tendency to move alongside the economy’s cyclical condition) of remittances, the issue should not be isolated from the rest of the economy. Higher remittances are tied to better home-country economic conditions, so they are linked with policies that promote higher investment and export-led growth with subdued inflation that does not erode home-country investments. In particular, one important requirement is allowing the formal rate to reflect the real situation in the external sector by improving the overall macroeconomic situation with a business-friendly environment and consistent policies. That is the key to perfecting this mission.
(The writer is a PhD candidate attached to Monash University, Australia. The views and opinions expressed in this article are those of the writer, and he could be reached at charith.gamage@monash.edu)
Features
Rebuilding the country requires consultation
A positive feature of the government that is emerging is its responsiveness to public opinion. The manner in which it has been responding to the furore over the Grade 6 English Reader, in which a weblink to a gay dating site was inserted, has been constructive. Government leaders have taken pains to explain the mishap and reassure everyone concerned that it was not meant to be there and would be removed. They have been meeting religious prelates, educationists and community leaders. In a context where public trust in institutions has been badly eroded over many years, such responsiveness matters. It signals that the government sees itself as accountable to society, including to parents, teachers, and those concerned about the values transmitted through the school system.
This incident also appears to have strengthened unity within the government. The attempt by some opposition politicians and gender misogynists to pin responsibility for this lapse on Prime Minister Dr Harini Amarasuriya, who is also the Minister of Education, has prompted other senior members of the government to come to her defence. This is contrary to speculation that the powerful JVP component of the government is unhappy with the prime minister. More importantly, it demonstrates an understanding within the government that individual ministers should not be scapegoated for systemic shortcomings. Effective governance depends on collective responsibility and solidarity within the leadership, especially during moments of public controversy.
The continuing important role of the prime minister in the government is evident in her meetings with international dignitaries and also in addressing the general public. Last week she chaired the inaugural meeting of the Presidential Task Force to Rebuild Sri Lanka in the aftermath of Cyclone Ditwah. The composition of the task force once again reflects the responsiveness of the government to public opinion. Unlike previous mechanisms set up by governments, which were either all male or without ethnic minority representation, this one includes both, and also includes civil society representation. Decision-making bodies in which there is diversity are more likely to command public legitimacy.
Task Force
The Presidential Task Force to Rebuild Sri Lanka overlooks eight committees to manage different aspects of the recovery, each headed by a sector minister. These committees will focus on Needs Assessment, Restoration of Public Infrastructure, Housing, Local Economies and Livelihoods, Social Infrastructure, Finance and Funding, Data and Information Systems, and Public Communication. This structure appears comprehensive and well designed. However, experience from post-disaster reconstruction in countries such as Indonesia and Sri Lanka after the 2004 tsunami suggests that institutional design alone does not guarantee success. What matters equally is how far these committees engage with those on the ground and remain open to feedback that may complicate, slow down, or even challenge initial plans.
An option that the task force might wish to consider is to develop a linkage with civil society groups with expertise in the areas that the task force is expected to work. The CSO Collective for Emergency Relief has set up several committees that could be linked to the committees supervised by the task force. Such linkages would not weaken the government’s authority but strengthen it by grounding policy in lived realities. Recent findings emphasise the idea of “co-production”, where state and society jointly shape solutions in which sustainable outcomes often emerge when communities are treated not as passive beneficiaries but as partners in problem-solving.
Cyclone Ditwah destroyed more than physical infrastructure. It also destroyed communities. Some were swallowed by landslides and floods, while many others will need to be moved from their homes as they live in areas vulnerable to future disasters. The trauma of displacement is not merely material but social and psychological. Moving communities to new locations requires careful planning. It is not simply a matter of providing people with houses. They need to be relocated to locations and in a manner that permits communities to live together and to have livelihoods. This will require consultation with those who are displaced. Post-disaster evaluations have acknowledged that relocation schemes imposed without community consent often fail, leading to abandonment of new settlements or the emergence of new forms of marginalisation. Even today, abandoned tsunami housing is to be seen in various places that were affected by the 2004 tsunami.
Malaiyaha Tamils
The large-scale reconstruction that needs to take place in parts of the country most severely affected by Cyclone Ditwah also brings an opportunity to deal with the special problems of the Malaiyaha Tamil population. These are people of recent Indian origin who were unjustly treated at the time of Independence and denied rights of citizenship such as land ownership and the vote. This has been a festering problem and a blot on the conscience of the country. The need to resettle people living in those parts of the hill country which are vulnerable to landslides is an opportunity to do justice by the Malaiyaha Tamil community. Technocratic solutions such as high-rise apartments or English-style townhouses that have or are being contemplated may be cost-effective, but may also be culturally inappropriate and socially disruptive. The task is not simply to build houses but to rebuild communities.
The resettlement of people who have lost their homes and communities requires consultation with them. In the same manner, the education reform programme, of which the textbook controversy is only a small part, too needs to be discussed with concerned stakeholders including school teachers and university faculty. Opening up for discussion does not mean giving up one’s own position or values. Rather, it means recognising that better solutions emerge when different perspectives are heard and negotiated. Consultation takes time and can be frustrating, particularly in contexts of crisis where pressure for quick results is intense. However, solutions developed with stakeholder participation are more resilient and less costly in the long run.
Rebuilding after Cyclone Ditwah, addressing historical injustices faced by the Malaiyaha Tamil community, advancing education reform, changing the electoral system to hold provincial elections without further delay and other challenges facing the government, including national reconciliation, all require dialogue across differences and patience with disagreement. Opening up for discussion is not to give up on one’s own position or values, but to listen, to learn, and to arrive at solutions that have wider acceptance. Consultation needs to be treated as an investment in sustainability and legitimacy and not as an obstacle to rapid decisionmaking. Addressing the problems together, especially engagement with affected parties and those who work with them, offers the best chance of rebuilding not only physical infrastructure but also trust between the government and people in the year ahead.
by Jehan Perera
Features
PSTA: Terrorism without terror continues
When the government appointed a committee, led by Rienzie Arsekularatne, Senior President’s Counsel, to draft a new law to replace the Prevention of Terrorism Act (PTA), as promised by the ruling NPP, the writer, in an article published in this journal in July 2025, expressed optimism that, given Arsekularatne’s experience in criminal justice, he would be able to address issues from the perspectives of the State, criminal justice, human rights, suspects, accused, activists, and victims. The draft Protection of the State from Terrorism Act (PSTA), produced by the Committee, has been sharply criticised by individuals and organisations who expected a better outcome that aligns with modern criminal justice and human rights principles.
This article is limited to a discussion of the definition of terrorism. As the writer explained previously, the dangers of an overly broad definition go beyond conviction and increased punishment. Special laws on terrorism allow deviations from standard laws in areas such as preventive detention, arrest, administrative detention, restrictions on judicial decisions regarding bail, lengthy pre-trial detention, the use of confessions, superadded punishments, such as confiscation of property and cancellation of professional licences, banning organisations, and restrictions on publications, among others. The misuse of such laws is not uncommon. Drastic legislation, such as the PTA and emergency regulations, although intended to be used to curb intense violence and deal with emergencies, has been exploited to suppress political opposition.
International Standards
The writer’s basic premise is that, for an act to come within the definition of terrorism, it must either involve “terror” or a “state of intense or overwhelming fear” or be committed to achieve an objective of an individual or organisation that uses “terror” or a “state of intense or overwhelming fear” to realise its aims. The UN General Assembly has accepted that the threshold for a possible general offence of terrorism is the provocation of “a state of terror” (Resolution 60/43). The Parliamentary Assembly of the Council of Europe has taken a similar view, using the phrase “to create a climate of terror.”
In his 2023 report on the implementation of the UN Global Counter-Terrorism Strategy, the Secretary-General warned that vague and overly broad definitions of terrorism in domestic law, often lacking adequate safeguards, violate the principle of legality under international human rights law. He noted that such laws lead to heavy-handed, ineffective, and counterproductive counter-terrorism practices and are frequently misused to target civil society actors and human rights defenders by labelling them as terrorists to obstruct their work.
The United Nations Office on Drugs and Crime (UNODC) has stressed in its Handbook on Criminal Justice Responses to Terrorism that definitions of terrorist acts must use precise and unambiguous language, narrowly define punishable conduct and clearly distinguish it from non-punishable behaviour or offences subject to other penalties. The handbook was developed over several months by a team of international experts, including the writer, and was finalised at a workshop in Vienna.
Anti-Terrorism Bill, 2023
A five-member Bench of the Supreme Court that examined the Anti-Terrorism Bill, 2023, agreed with the petitioners that the definition of terrorism in the Bill was too broad and infringed Article 12(1) of the Constitution, and recommended that an exemption (“carve out”) similar to that used in New Zealand under which “the fact that a person engages in any protest, advocacy, or dissent, or engages in any strike, lockout, or other industrial action, is not, by itself, a sufficient basis for inferring that the person” committed the wrongful acts that would otherwise constitute terrorism.
While recognising the Court’s finding that the definition was too broad, the writer argued, in his previous article, that the political, administrative, and law enforcement cultures of the country concerned are crucial factors to consider. Countries such as New Zealand are well ahead of developing nations, where the risk of misuse is higher, and, therefore, definitions should be narrower, with broader and more precise exemptions. How such a “carve out” would play out in practice is uncertain.
In the Supreme Court, it was submitted that for an act to constitute an offence, under a special law on terrorism, there must be terror unleashed in the commission of the act, or it must be carried out in pursuance of the object of an organisation that uses terror to achieve its objectives. In general, only acts that aim at creating “terror” or a “state of intense or overwhelming fear” should come under the definition of terrorism. There can be terrorism-related acts without violence, for example, when a member of an extremist organisation remotely sabotages an electronic, automated or computerised system in pursuance of the organisation’s goal. But when the same act is committed by, say, a whizz-kid without such a connection, that would be illegal and should be punished, but not under a special law on terrorism. In its determination of the Bill, the Court did not address this submission.
PSTA Proposal
Proposed section 3(1) of the PSTA reads:
Any person who, intentionally or knowingly, commits any act which causes a consequence specified in subsection (2), for the purpose of-
(a) provoking a state of terror;
(b) intimidating the public or any section of the public;
(c) compelling the Government of Sri Lanka, or any other Government, or an international organisation, to do or to abstain from doing any act; or
(d) propagating war, or violating territorial integrity or infringing the sovereignty of Sri Lanka or any other sovereign country, commits the offence of terrorism.
The consequences listed in sub-section (2) include: death; hurt; hostage-taking; abduction or kidnapping; serious damage to any place of public use, any public property, any public or private transportation system or any infrastructure facility or environment; robbery, extortion or theft of public or private property; serious risk to the health and safety of the public or a section of the public; serious obstruction or damage to, or interference with, any electronic or automated or computerised system or network or cyber environment of domains assigned to, or websites registered with such domains assigned to Sri Lanka; destruction of, or serious damage to, religious or cultural property; serious obstruction or damage to, or interference with any electronic, analogue, digital or other wire-linked or wireless transmission system, including signal transmission and any other frequency-based transmission system; without lawful authority, importing, exporting, manufacturing, collecting, obtaining, supplying, trafficking, possessing or using firearms, offensive weapons, ammunition, explosives, articles or things used in the manufacture of explosives or combustible or corrosive substances and biological, chemical, electric, electronic or nuclear weapons, other nuclear explosive devices, nuclear material, radioactive substances, or radiation-emitting devices.
Under section 3(5), “any person who commits an act which constitutes an offence under the nine international treaties on terrorism, ratified by Sri Lanka, also commits the offence of terrorism.” No one would contest that.
The New Zealand “carve-out” is found in sub-section (4): “The fact that a person engages in any protest, advocacy or dissent or engages in any strike, lockout or other industrial action, is not by itself a sufficient basis for inferring that such person (a) commits or attempts, abets, conspires, or prepares to commit the act with the intention or knowledge specified in subsection (1); or (b) is intending to cause or knowingly causes an outcome specified in subsection (2).”
While the Arsekularatne Committee has proposed, including the New Zealand “carve out”, it has ignored a crucial qualification in section 5(2) of that country’s Terrorism Suppression Act, that for an act to be considered a terrorist act, it must be carried out for one or more purposes that are or include advancing “an ideological, political, or religious cause”, with the intention of either intimidating a population or coercing or forcing a government or an international organisation to do or abstain from doing any act.
When the Committee was appointed, the Human Rights Commission of Sri Lanka opined that any new offence with respect to “terrorism” should contain a specific and narrow definition of terrorism, such as the following: “Any person who by the use of force or violence unlawfully targets the civilian population or a segment of the civilian population with the intent to spread fear among such population or segment thereof in furtherance of a political, ideological, or religious cause commits the offence of terrorism”.
The writer submits that, rather than bringing in the requirement of “a political, ideological, or religious cause”, it would be prudent to qualify proposed section 3(1) by the requirement that only acts that aim at creating “terror” or a “state of intense or overwhelming fear” or are carried out to achieve a goal of an individual or organisation that employs “terror” or a “state of intense or overwhelming fear” to attain its objectives should come under the definition of terrorism. Such a threshold is recognised internationally; no “carve out” is then needed, and the concerns of the Human Rights Commission would also be addressed.
by Dr. Jayampathy Wickramaratne
President’s Counsel
Features
ROCK meets REGGAE 2026
We generally have in our midst the famous JAYASRI twins, Rohitha and Rohan, who are based in Austria but make it a point to entertain their fans in Sri Lanka on a regular basis.
Well, rock and reggae fans get ready for a major happening on 28th February (Oops, a special day where I’m concerned!) as the much-awaited ROCK meets REGGAE event booms into action at the Nelum Pokuna outdoor theatre.
It was seven years ago, in 2019, that the last ROCK meets REGGAE concert was held in Colombo, and then the Covid scene cropped up.

Chitral Somapala with BLACK MAJESTY
This year’s event will feature our rock star Chitral Somapala with the Australian Rock+Metal band BLACK MAJESTY, and the reggae twins Rohitha and Rohan Jayalath with the original JAYASRI – the full band, with seven members from Vienna, Austria.
According to Rohitha, the JAYASRI outfit is enthusiastically looking forward to entertaining music lovers here with their brand of music.
Their playlist for 28th February will consist of the songs they do at festivals in Europe, as well as originals, and also English and Sinhala hits, and selected covers.
Says Rohitha: “We have put up a great team, here in Sri Lanka, to give this event an international setting and maintain high standards, and this will be a great experience for our Sri Lankan music lovers … not only for Rock and Reggae fans. Yes, there will be some opening acts, and many surprises, as well.”

Rohitha, Chitral and Rohan: Big scene at ROCK meets REGGAE
Rohitha and Rohan also conveyed their love and festive blessings to everyone in Sri Lanka, stating “This Christmas was different as our country faced a catastrophic situation and, indeed, it’s a great time to help and share the real love of Jesus Christ by helping the poor, the needy and the homeless people. Let’s RISE UP as a great nation in 2026.”
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