By: Staff Writer
January 12, Colombo (LNW): Sri Lanka has witnessed an unprecedented surge in foreign worker remittances, reaching record highs in December 2025, according to Central Bank data. Official remittances jumped 43.2 percent month-on-month to US$879.1 million, surpassing the previous peak of US$812.7 million recorded in December 2020. The cumulative inflow for the year also reached an all-time high of US$8,076.2 million, marking a 22.8 percent rise from 2024’s US$6.58 billion.
Experts point to several factors behind this surge. A significant driver is the continued outflow of Sri Lanka’s labor force seeking overseas employment. The trend, accelerated after the country’s 2022 economic crisis, has seen a growing number of workers, particularly professionals, moving abroad to earn foreign exchange. Remittances now stand as the top foreign exchange revenue source for the island nation, a critical lifeline as it navigates post-crisis economic recovery.
Government policy and regulatory adjustments have also played a pivotal role. Following the dismantling of the parallel exchange rate regime, many expatriates who had previously relied on informal channels like Hawala and Undiyal transfers shifted back to official banking systems. The parallel rate had emerged after the Central Bank engaged in large-scale money printing to maintain low policy rates, which made informal channels more attractive. By abandoning this system, the authorities effectively channeled higher volumes of remittances through formal mechanisms.
In its 2026 budget, the government has proposed new incentives to sustain and further boost remittances, including housing loans and a contributory pension scheme for Sri Lankans employed overseas. Such measures are expected to encourage workers to remit funds through formal channels while providing long-term financial security for expatriates.
Despite the optimism, challenges remain. While remittance inflows have surged, reliance on foreign labor leaves the economy vulnerable to global labor demand fluctuations and geopolitical risks. Furthermore, sustaining this growth requires continuous monitoring of interest rates, exchange policies, and banking sector efficiencies to prevent a repeat of the informal remittance surge seen in 2021. Back then, a spike in informal transfers led to a sharp decline in official remittances as higher parallel rates offered better returns outside the banking system.
Analysts caution that while remittances provide critical short-term liquidity and foreign exchange, they are not a substitute for long-term structural reforms. Investments in domestic industries, infrastructure, and professional skill development are essential to balance the economy and reduce overreliance on overseas earnings.
Sri Lanka’s record remittances reflect a combination of strategic policy shifts, labor migration, and global economic factors. The central challenge now lies in sustaining this growth while leveraging these inflows to build a more resilient and diversified economy.
