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Foreign Employment Bureau to bear remittance incentive costs

05 Jun 2022

  • Manusha Nanayakkara plans array of perks for migrant workers
  • Says no allocation will be sought from Treasury 
By Tanya Shan The massive incentives announced for Sri Lankan migrant workers in order to attract more remittances into the country are to be funded by the Sri Lanka Bureau of Foreign Employment (SLBFE). Speaking to The Sunday Morning Business, Minister of Labour and Foreign Employment Manusha Nanayakkara, who announced the incentives, stated that the Ministry would not seek any allocation from the Treasury to provide them and that they would be funded by the SLBFE.  “We are meeting with Treasury officials to structure formulas for implementing these measures. Following this, we will get them approved by the Cabinet of Ministers,” he stated. Under these incentives, Sri Lanka will provide vehicle import permits to migrant workers who remit $ 100,000 worth of foreign remittances per year through banks, in a bid to attract remittances of at least $ 500 million per month.  The Minister also hopes to propose to the Cabinet to consider granting Value-Added Tax (VAT) concessions on the purchase of certain goods according to the amount of remittances sent by migrant workers.  He also hopes to propose that in a situation where the importation of vehicles has been banned, migrant workers who send remittances of $ 100,000 within a year should be allowed to import vehicles. However, days before Nanayakkara made this announcement, Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe stated that using Sri Lankan taxpayers’ money to provide incentives to migrant workers to send their remittances into the country was not a good policy. Dr. Weerasinghe said that the CBSL had provided incentives for remittances, while more requests had been made from the Treasury for various other incentives to be implemented, which were still being considered by the CBSL. “In my personal opinion, there is no need to provide incentives for remittances sent by migrant workers using taxpayers’ money,” he added. The CBSL Governor said that this was a wrong policy to follow, because migrant workers did not have to pay any taxes in Sri Lanka for the money they sent to their families, while people earning in Sri Lanka had to earn money for their families and pay taxes to the Government. Therefore, he said that the CBSL and the Treasury could look into an alternative, such as providing a duty-free allowance to migrant workers for remittances. However, Dr. Weerasinghe noted that providing an allowance to every migrant worker meant that the Government was using taxpayer money on migrant workers, instead of using them for the people within the country. Further, he noted that some Sri Lankans working abroad were requesting duty-free car permits from the Government to send their foreign exchange to the country. In December 2021, the Monetary Board of the CBSL under former Governor Ajith Nivard Cabraal decided to pay an incentive of Rs. 8 per US Dollar for workers’ remittances, in addition to the existing incentive of Rs. 2 at that time, paying a total of Rs. 10 extra per US Dollar under the Incentive Scheme on Inward Workers’ Remittances, with the intention of attracting remittances to the banking system from the black market. However, this scheme failed to produce any results as the gap between the CBSL exchange rates and black market rates increased, giving a much higher premium for the dollars converted via the black market. Accordingly, remittances fell from $ 478 million in June 2021 to a record low of $ 208 million by February 2022. The scheme continued until March 2022, at which point the CBSL permitted a flexible exchange rate.  


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