For decades the outflow of Sri Lankan workers and the inflow of their remittances have been crucial to the country’s external stability. Today this reality merits a deeper policy overhaul: the flows are large, evolving, and carry both economic benefits and social costs.
The Economic Importance
Workers’ remittances into Sri Lanka remain a major source of foreign exchange. According to the Central Bank of Sri Lanka (“CBSL”), over the first quarter of 2024, remittances totalled USD 1,536.1 million.
More broadly, in the first eight months of 2025, inflows reached about USD 5.11 billion, a 19.3 % increase on the same period a year earlier.
Remittances have covered about 80 % of the annual trade deficit, on average over the past two decades, in Sri Lanka.
In relation to GDP the World Bank data show that personal remittances were around 8.8 % of GDP in 2020.
They thus function as a non-debt creating inflow, helping to support reserves, stabilise the exchange rate and underpin consumption at home.
Changing Patterns of Migration & Remittances
- The composition of both migration and remittances is shifting. The major sending countries remain in the Gulf; Kuwait, Saudi Arabia, Qatar, UAE but the distribution across destination countries and skill-levels is broadening. In Q1 2024 the highest remittances came from Kuwait, followed by Saudi Arabia, Qatar and the UAE.
- Departures for foreign employment during Q1 2025 amounted to 69,682 (monthly average ~23,227).
- This suggests an expanding labour-migration trend. Analysts observe that remittances now amount to about 6–7 % of GDP and roughly 20–25 % of foreign-exchange earnings.
What this means: The Sri Lankan economy remains heavily reliant on migrant worker income, both in terms of aggregate flows and as a stabiliser of the external account.
Policy & Regulatory Gaps
Despite the importance of the flows, there are multiple policy shortcomings:
The primary regulatory body for overseas employment, the Sri Lanka Bureau of Foreign Employment (SLBFE), continues to struggle with monitoring labour agent behaviour, ensuring redress for migrant abuse, and tracking outflows.
Bilateral labour agreements exist but enforcement is weak. Many migrants face precarious contracts, wage delays or recruiter misconduct.
The reliance on informal channels (“hawala”, un-reported flows) remains substantial; this weakens the domestic capture of full value and complicates policy design. Studies show remittance flows fell by 22.7 % in 2021 and a further 30.9 % in 2022, a reflection of pandemic-shock, crisis and informal outflows.
SAGE Journals
- Return-and-reintegration frameworks are weak: skills gained abroad often are not absorbed at home, leading to “brain waste”. In that respect the policy treat remittances chiefly as money-in not as human-asset circulation.
- Taxation/incentives: There remains little in the way of targeted incentive or utilisation policy that channels remittances into productive investment rather than consumption alone.
Human and Social Impact
Migration and remittances carry significant social effects. Many households depend on remittance income for basic consumption or schooling. Family separation is common, with implications for children’s welfare, spousal burden and psychosocial outcomes. The feminisation of migration is a growing trend: more women, often as domestic workers or caregivers, migrate abroad. The rights and protections of women migrants require stronger policy attention.
Meanwhile, returnees may find reintegration difficult: the skills or experiences abroad may not match domestic labour market demands. The risk of dependency on remittances (rather than domestic job creation) also has longer-term structural implications.
Toward a Future Model
To leverage the benefits and mitigate the risks, Sri Lanka must look beyond seeing remittances as a wind-fall and instead treat them as part of a coherent labour-migration-development nexus. Some policy directions:
- Formalise and incentivise remittance channels. Increasing digital channels and lowering cost can shift flows from informal to formal sectors, strengthening data, tax-capture and productive use opportunities.
- Promote financial literacy and investment-readiness among migrant households. If remittances are used for asset-building (small business, education, housing) rather than purely consumption, the development multiplier increases.
- Skill-transfer and return-pathways. Encourage migrants to return with new skills or link diaspora networks to domestic projects. This combats “brain drain” and fosters diaspora engagement.
- Protect the migrant worker. Strengthen enforcement of labour rights abroad, regulate recruitment agencies more strictly, provide legal-aid and helpline services.
- Diversify destination and skill-levels. Encourage higher-skilled migration (nurses, IT professionals) with bilateral agreements that ensure rights and returns. Manage the risk of dependency on low-skilled labour.
- Align remittance policy with external stability. Given the role of remittances in covering trade deficits and stabilising the balance of payments, macroeconomic policy (exchange rate, reserves) and migration strategy should be coordinated.
Conclusion
The migration-remittance nexus is no longer a peripheral economic theme for Sri Lanka: it is core to the country’s external resilience, household income dynamics and labour-market strategy. But to treat it as simply a cash-flow channel is to ignore the human, structural and policy complexities behind the numbers. A strategic, rights-aware, future-oriented migration policy linked to domestic investment and skills utilisation can convert what is currently a cyclical remittance lifeline into a sustainable development lever.
