Heavily reliant on worker remittances from West Asia for its economic recovery, Sri Lanka has expressed “grave concern” over the escalating conflict in the region.

Migrant workers sent a record $8 billion in remittances last year, boosting foreign reserves and helping recovery from the country’s 2022 economic crash. A total of 3,10,915 Sri Lankans left for foreign employment in 2025, according to Central Bank data, working mainly in domestic service, caregiving, construction, and agriculture. The United Arab Emirates, Kuwait, and Saudi Arabia were the largest sources of remittances, along with the United Kingdom, which included funds routed through other countries.

“Sri Lanka expresses its grave concern regarding the recent hostilities in the West Asian region,” the Ministry of Foreign Affairs, Foreign Employment & Tourism said on May 6, 2026. Pointing to a large Sri Lankan expatriate population whose safety is a “matter of paramount concern,” the Ministry called for “maximum restraint” from all parties, without naming any party to the conflict.

Since late February this year, when the United States-Israel combine launched its war on Iran, triggering a series of retaliatory attacks, Sri Lanka’s migrant workers have been living in precarity. Even so, they contributed $815 million in remittances in March 2026, recording a year-on-year growth of 17.5%. “Cumulatively, remittances during the first quarter of the year recorded a notable growth of 26.5% on a year-on-year basis,” the Central Bank said. Despite tensions and grave risks in the West Asian region, workers’ remittances in this period far exceeded earnings from the exports and tourism sectors, two other key foreign exchange earners.

‘Commendable outcomes’

In April 2026, the International Monetary Fund, which steers the island’s recovery programme, including through painful austerity measures, noted that Sri Lanka’s “ambitious reform agenda” continued to deliver “commendable outcomes”. It pointed to 5% growth in 2025, positive inflation, and an increase in gross official reserves to $7 billion at end-March 2026.

Although hostilities in West Asia are impacting Sri Lanka “directly and indirectly” — such as fuel price hikes, soaring air ticket prices — they have not affected remittances from workers, Deputy Minister of Foreign Affairs and Foreign Employment Arun Hemachandra told The Hindu. “We sincerely hope there is stability in the [West Asian] region and workers can continue going overseas. We also hope there are no huge job losses like we saw during the pandemic,” he said.  Sri Lankan missions in the region have been instructed to offer more support and emergency assistance to workers through helplines. “We are also engaging closely with our multilateral partners such as the International Labour Organization and the International Organization for Migration,” he said, adding that the government was trying its “level best” to motivate workers abroad and those seeking employment overseas.

Sharp rise in applications

The Anura Kumara Dissanayake administration aims to send 4,00,000 workers abroad this year, continuing its predecessor government’s policy of encouraging labour migration to bolster foreign reserves amid the tentative recovery. With the conflict in West Asia persisting, however, it remains unclear if it may be “practically possible” to meet that target, the Deputy Minister said. As of May 5, as many as 82,302 people have registered for overseas employment, officials said. Since the 2022 economic crisis, Sri Lanka has seen a sharp increase in passport applications as families try sending a member abroad, hoping their earnings will help with the rising living costs at home.

Asked why tens of thousands of workers are scrambling for jobs overseas, leaving behind their families and enduring exploitative working conditions, while the government claims it has stabilised the economy, Mr. Hemachandra said that government was presently focusing on “macroeconomic stability”. On the heels of a grave economic crash and dollar shortage, the country may have to encourage overseas employment “in the short term”, he said, insisting this was not the government’s long-term strategy. “When the microeconomic condition becomes normal, subject to the macroeconomic condition becoming normal, we believe there would be a change in this trend. People would opt for foreign employment not owing to a crisis, but as a matter of choice,” he added, suggesting that the ongoing recovery programme prioritised macroeconomic fundamentals over people’s daily hardships.

Rights defenders and labour activists also point to the apparent contradiction in the government continuing to send workers to Israel while pledging support for the Palestinian cause. Some 30,000 Sri Lankan workers are in Israel, employed in construction, as caregivers, and in agriculture.

‘No contradiction’

Queried about the government’s position, Mr. Hemachandra said Sri Lanka has historically stood for the Palestinian cause. “Our party [Janatha Vimukthi Peramuna – JVP or People’s Liberation Front] has also always been in solidarity with Palestine,” he said. Pointing to Sri Lanka’s past diplomatic relations with Israel and the opportunities for workers, where the “pay is high and working conditions are good”, he said: “This government at no point thought of stopping those things… because already many people were on the waiting list and hoping to go. After we came to power, we addressed concerns of irregularities and fraudulent practices and streamlined the process. On the other hand, we separated our Free Palestine stand and our diplomatic relationship with Israel as two different things. I think any country should have that choice. And when take the opportunity to send workers to Israel, that does not change our stand on Palestine,” he said, adding: “There is no contradiction in that.”

Meanwhile, authorities are also exploring “non-Middle Eastern” markets such as Romania and South Korea and focusing on skilled migration. “When we develop more skilled migration programmes, I am sure that people who go for those jobs will get back in a very reasonable period. Then they could contribute to the Sri Lankan economy directly while being in the country,” he said.

Published – May 12, 2026 10:25 pm IST

India’s fans gather outside the R. Premadasa Stadium during a practice session ahead of the ICC Men’s T20 World Cup 2026 match between India and Pakistan, in Colombo, Sri Lanka, Saturday, Feb. 14, 2026.
| Photo Credit: PTI

 Despite strong recent growth, low inflation, and robust external inflows, food prices remain high, and reserve accumulation has slowed in Sri Lanka. File.
| Photo Credit: Reuters

An unprecedented financial crash in 2022 brought months of consumer goods shortages, with inflation peaking at nearly 70% that year. File
| Photo Credit: Reuters

Sri Lanka’s consumer prices fell by 2.1% in November, the highest deflation rate recorded by the economically fragile island nation since 1961, official data showed Saturday (November 30, 2024).

An unprecedented financial crash in 2022 brought months of consumer goods shortages, with inflation peaking at nearly 70% that year.

Since then, a $2.9 billion bailout loan from the International Monetary Fund (IMF), tax hikes, and other austerity measures have slowly made headway in repairing the island’s economy.

“Headline inflation will remain negative in the next few months, deeper than previously projected, mainly due to larger downward adjustments in energy prices and reductions in volatile food prices,” Sri Lanka’s central bank said in a statement.

The bank said inflation was likely to return to its target level of five percent in the coming months.

Sri Lanka had already seen deflation of 0.8% in October and 0.5% in September.

President Anura Kumara Dissanayake, who was elected in September, has vowed to maintain the IMF bailout programme negotiated by his predecessor that includes higher taxes and cuts to state spending.

Colombo:

Cash-strapped Sri Lanka’s economy recorded falling consumer prices for the first time in 29 years, official data showed Monday, with the September inflation figure dipping to negative 0.5 per cent.

Census and Statistics Department data showed price drops in both food and non-food goods contributing to deflation in September, compared to inflation of 0.5 per cent in August.

Sri Lanka last recorded deflation in March 1995 with a figure of negative 0.9 per cent. The previous price fall to that was in 1985 when inflation was negative 2.1 per cent.

Inflation peaked at 69.8 per cent two years ago at the height of an unprecedented economic crisis in the island nation.

Acute shortages of food, fuel and medicines led to months of protests that eventually forced then-president Gotabaya Rajapaksa to temporarily flee the country and resign in July 2022.

His successor Ranil Wickremesinghe secured a $2.9 billion International Monetary Fund bailout and raised taxes and prices to stabilise the economy.

Wickremesinghe lost office after a presidential election this month.

The winner of that contest, President Anura Kumara Dissanayake, has vowed to maintain the IMF programme but relax some of the austerity measures it imposed.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

A police officer stands guard outside a polling booth, a day before the presidential election, in Colombo on September 20, 2024.
| Photo Credit: Reuters

Over 17 million Sri Lankans will have a chance to elect their next President on Saturday (September 21, 2024) in a crucial election, the first to be held after the island nation’s economy crashed in 2022.

A good turnout is expected, in line with Sri Lanka’s record of high voter participation in every national election. The last presidential poll in 2019 saw a voter turnout of 83.72 %.

A total of 38 candidates are in the fray this election, Sri Lanka’s ninth to elect the country’s Executive President. Voting will take place from 7 a.m. to 4 p.m., across 13,421 polling centers onthe island, the Election Commission of Sri Lanka said.

Departing from past presidential elections where two main candidates dominated the contest, Sri Lanka is witnessing its first three-cornered race, in which incumbent Ranil Wickremesinghe, Leader of Opposition Sajith Premadasa, and prominent opposition legislator Anura Kumara Dissanayake — have emerged top contenders vying for the country’s most powerful office. Sri Lanka follows a preferential voting system allowing voters to mark three preferences on the ballot. A candidate must secure 50 % plus one vote to be declared winner. In the event no candidate reaches the mark, which is more likely in a three-way contest, a second count of votes will be used to pick the winner, factoring in the preferential votes received by the top two candidates.  

As citizens’ economic concerns take centre stage in this election, the three main candidates have promised economic recovery and relief from hardships. They have pledged to take forward the ongoing International Monetary Fund (IMF) programme that is shaping the bankrupt country’s policies to restructure its foreign debt with a diverse group of external creditors.

Sri Lanka’s unprecedented crisis two years ago manifested in acute shortages of essentials and long lines for fuel and gas. While supplies have since been restored — at starkly higher prices owing to inflation — and fiscal indicators have improved, scores of families are struggling to make ends meet amid painful austerity measures.

Editorial | ​Back from the brink: On the Sri Lankan elections and the road ahead

Call for change

Two years after a mass uprising booted out President Gotabaya Rajapaksa at the height of the crisis, and demanded system change, citizens are hoping that this election will yield “change”, through a leader who can break free from the “old, corrupt political culture”, and will reduce their everyday suffering.

Colombo-based autorickshaw driver I. Mohamed is clear about the kind of change he wants. “I am not talking about those big changes that some people ask. I want the cost of living to come down, I want to be able to afford good education for my children, I want my family to be able to eat three decent meals without worrying if we can afford it. That is all,” he says.

Weighed down by everyday strain amidst falling in real incomes and high living costs, many Sri Lankans have been forced to drastically alter their lifestyles. Poor families are eating fewer meals, or have changed their diet, cutting out animal protein, for instance.  In a report published in April this year, the World Bank pointed to an increase in food insecurity and malnutrition, a doubling of poverty and widening inequality in Sri Lanka since the crisis. Around 60 % of the households in the country are struggling to cope with a decline in income, it said.

How economy plays an important role in Sri Lankan election

How economy plays an important role in Sri Lankan election
| Video Credit:
The Hindu

In a widely shared pre-election social media post, senior lawyer and noted commentator Saliya Peiris underscored the need to focus on both economic development and governance. “The reality is that democracy and governance are tied with the sustainable economic development of the nation. Long-term economic stability is linked to the respect for democracy, the rule of the law, governance, and the rights of people,” he said, adding: “Those who fail to learn from the lessons of the past are condemned to repeat it.”

Published – September 20, 2024 07:04 pm IST