Is Our Economic Crisis Over or On Pause? Part I
Posted on January 14th, 2025
By Shivanthi Ranasinghe Courtesy Ceylon Today
By Shivanthi Ranasinghe
The international lifestyle magazine ‘Vogue’ has given Sri Lanka a glowing endorsement by claiming the Island as this winter’s hottest travel destination. This recognition from the prestigious magazine will certainly help Sri Lanka in more than one way.
Revenues earned from tourism and foreign remittances are the two main single factors that are contributing to strengthening our economy. Therefore, high recommendations from highly influential sources as Vogue not only boost tourist arrivals. It will greatly support a deeply troubled economy.
How is the Sri Lankan tourism faring?
Sri Lanka’s tourism industry has many reasons to feel optimistic. Year 2024 recorded over two million (2,053,465 tourist to be exact) tourist arrivals. This is a 28 percent increase compared to 2023. In the month of December alone 248,592 visitors came to Sri Lanka. According to the Central Bank of Sri Lanka, we earned USD 3,168.6 million. This is a significant 53.2% increase from our earnings in 2023.
Though 2025 is still young, tourist arrivals continue to show an upward trend. In the first nine days of this month, 70,944 visitors have been recorded.
While these figures are encouraging, we still have not reached the numbers we had before the Easter Sunday attacks in April 2019. Just the year before, Sri Lanka recorded 2.3 million tourists.
Our tourism industry has been through a lot. Terrorism that gripped this Island nation for nearly 30 years took a toll on tourism. However, its rise since the annihilation of terrorism in 2009 was mercuric. This growing industry took a devastating blow with the Easter Sunday attack. The global pandemic thereafter kept the sector down on its knees. The anti-government protests hit tourism hard and refused to let the industry help the collapsing economy.
Yet throughout all these misadventures, Sri Lanka’s tourism remained resilient. Especially during the pandemic, we saw the industry coming up with very innovative solutions.
However, while our industry has shown immense courage and resilience, we have fallen short on imagination. Our tourism is being sustained by mostly the natural beauty, wild life and archaeological sites. In every other aspect pertaining to adventure that travellers seek, we still have only a skeleton of it. When we think of enhancing the industry, we look at increasing our accommodation capacities.
If we are to compare ourselves with other popular tourist destinations as Singapore or the Maldives, we can see that we are falling short in a very bad way. Even a frequent visitor to Singapore will see that the city nation’s landscape is constantly changing. It’s a country with very little landmass. Yet, every inch is devoted to its economy.
Everything in Singapore has been made into an adventure. For instance, compare our Dehiwela zoo against the Singapore zoo, the night life safari, the underwater world and the bird park where one can breakfast” with colourful parakeets. Compare our museums with archaeological artifacts with Singapore’s museums for history and science for children.
We are looking at the numbers of tourist arrivals and feel satisfied to see it edging beyond two million. Today we have a three million USD industry whereas Singapore is enjoying approximately an USD 21 billion industry.
The sad truth is that our tourism is simply acting as a buoyant to our sinking economy. If it is to actually strengthen our economy, then we need to look beyond just the arriving numbers. We have to attract tourist with high spending capacities and give them plenty of reasons to spend. This is the strategy of Singapore.
Remittances saving the day
Foreign remittances from migrant workers that come to Sri Lanka as cross -border payments to friends and family have also been a lifesaver to our economy. In 2023, remittances to Sri Lanka through formal banking channels increased by 57 percent. By June 2024, workers’ remittances increased by 11.4 percent from the same period in 2023. Last December, a significant increase of USD 613.8 million was recorded, which was USD 44.1 more than what was received during December 2023 and a jump from the remittances received in November 2024, which was USD 530.1 million.
Our main sources of remittances are from countries as Saudi Arabia, Qatar, India, Italy, China, Japan, Australia, and Canada. Most of our migrant workers in these countries are employed as skilled or semi-skilled workers. Therefore, most of our migrant workers do not earn high wages and forced into compromises just so that they can save enough to send money home.
Foreign remittances was a revenue that saved the Indian economy. The Indian migrant worker was also either skilled or semi-skilled. However, most of those who secured overseas jobs, especially in the computer field, never stayed in that job for long. Citing experience from their current job, they would apply for the next level in the corporate ladder. While on the job, they would be single-mindedly focussed on learning everything they could learn about it. Today, Indians fill a significant portion of top level executive positions in the corporate world.
Sri Lanka too must learn this lesson from India. If we are to depend from foreign remittances, then we need to improve our education programmes so that our workers can move from skilled to highly skilled categories.
Can our earnings support our imports?
The USD 613.8 million we received as foreign remittances in December 2024 may seem like a lot of money. However, we must not forget that we are an import dependent country. Even the flimsiest polytene bag is made from imported materials.
Our biggest bane is our dependency on oil imports. This literally runs our entire economy. In an average month, we spend around USD 200 million on fuel. For instance, in the first four months of 2024, we spent USD 648.7 million on oil imports.
We do have renewable energy sources in the form of hydro electricity power plants as well as solar and wind. However, this has not made much of a dent in our dependency for fuels and this will deepen as the restrictions on vehicle ban is lifted. The excise duties ranging from 200 percent to 300 percent have been imposed on the imported vehicles. While this will improve the State revenue, the fuel bill will continue to rise.
Instead of addressing this glaring issue, the Government has embarked on the ambiguous programme, The Clean Sri Lanka project. According to PM Harini Amarasuriya, the objective of this programme is to, integrate and facilitate all efforts made in the country with social, moral and environmental principles to restore Sri Lanka as a developed nation. Our ultimate goal is to establish good governance concepts and establish values and ethics for interactions and human relations at all levels of our society, thereby creating a beautiful nation of smiling people.”
So far this programme has not tackled vehicles that emit toxic fumes, which is a clear sign of fuel wastage and a major contributor to environmental pollution as well as a health hazard. Instead, the police are pouncing on public buses and three wheelers for their vehicle modifications items. How removal of these would contribute to a clean Sri Lanka is unclear.
However, it has already forced a factory in Bandaragama that produce these modifications under a government-approved license to close down. Consequently, 80 lost their livelihoods overnight. What this will do for the spirit of individuality, entrepreneurship and economy is already written on the wall.