Sri Lanka remittances climbed to an all-time high of nearly US$7.8 billion last year, according to government estimates, highlighting a strong recovery in official foreign currency inflows as migrant workers shifted back to formal banking channels.
Sri Lanka remittances surge to historic high as official inflows recover
Sri Lanka remittances reached their highest level on record in 2025, providing a critical boost to foreign exchange earnings as the island nation continues its recovery from the economic crisis of 2022. Foreign Affairs and Foreign Employment Minister Vijitha Herath said expatriate workers sent approximately 7.8 billion US dollars to Sri Lanka during the year, marking an unprecedented milestone in the country’s external sector performance.
The minister told reporters that while the Central Bank has yet to release the final official data for December, preliminary estimates place inflows for the month between 650 million and 700 million US dollars. With that addition, cumulative remittances for the year are expected to stand at around 7.8 billion dollars, surpassing all previous annual records.
Sri Lanka exceeded its earlier peak remittance inflow of 7.16 billion US dollars recorded in 2017 well before the end of the year, achieving that milestone within the first eleven months of 2025. The acceleration underscores the renewed confidence of overseas workers in the formal financial system after years of disruption caused by exchange rate distortions and policy uncertainty.
Worker remittances remain Sri Lanka’s largest single source of foreign exchange, outpacing earnings from tourism, exports, and portfolio flows. Their resurgence has been particularly significant for an economy still rebuilding reserves and stabilising external accounts following a severe balance-of-payments crisis that culminated in a sovereign default three years ago.
Officials and analysts attribute the sustained rise in remittance inflows largely to the Central Bank’s decision to abandon the parallel exchange rate regime that had emerged during the crisis years. At the height of monetary instability, exchange controls and artificially low official rates pushed many expatriates toward informal transfer mechanisms such as Undiyal and Hawala, which offered better conversion rates outside the banking system.
Once the Central Bank allowed greater flexibility in the exchange rate and narrowed the gap between official and informal markets, remittances began to flow back through licensed banks and authorised money transfer operators. This shift restored transparency, improved data accuracy, and strengthened the country’s foreign reserve position.
The recovery marks a sharp reversal from 2021, when official worker remittances fell steeply as expatriates increasingly bypassed formal channels. That decline coincided with a period of aggressive monetary expansion, during which liquidity injections and sterilised interventions were used to hold down policy interest rates. The resulting pressure on the currency gave rise to parallel exchange rates settled outside the regulated financial system.
In response to the economic collapse that followed, Sri Lanka has also recalibrated its labour migration strategy. Authorities have intensified efforts to deploy more migrant workers, particularly skilled and professional categories, with the aim of increasing per-worker foreign exchange inflows. Officials argue that a greater emphasis on higher-income employment abroad can enhance the stability and quality of remittance earnings over time.
The strong remittance performance has helped cushion the economy against external shocks and reduce reliance on short-term capital flows. It has also supported exchange rate stability, import financing, and debt servicing during a period of fiscal consolidation and structural reform.
Economists note that the consistency of inflows throughout the year is as important as the headline figure itself. Monthly remittances have remained elevated even amid global economic uncertainty, suggesting that overseas Sri Lankans continue to support households back home despite higher living costs and tighter financial conditions abroad.
However, analysts caution that sustaining this momentum will depend on maintaining confidence in macroeconomic management. Any return to exchange rate controls or policy-driven distortions could once again divert remittance flows into informal channels, undermining transparency and reserve accumulation.
For now, the record-breaking performance of Sri Lanka remittances stands as one of the clearest indicators of recovery in the external sector. As authorities await final confirmation from the Central Bank, policymakers view the milestone as validation of recent reforms and a reminder of the critical role played by migrant workers in stabilising the national economy.