SEC-S15W5: "Foreign Exchange"

Hey Steemian friends!

Sri Lanka is a small island nation and you might have heard some of its premium products like Ceylon Tea, Cinnamon or at least legendary cricketer Sanath Jayasuriya if you are a cricket fan 😀. They do bring some dollars to us but do you know how this small island nation makes its big bucks? Let's find out about Sri Lanka's economy and its foreign exchange earnings.

👉 Name 3 major ways your country earns foreign exchange. Briefly explain how each method works.

Sri Lanka has experienced its worst economic crisis post-COVID and that left us with a government with brink of declaring bankruptcy. Then everyone questions “How do we earn money as a country?”. It has become a hot topic and let me break down the situation.

^{The government is working to stabilize the economy}

• Workers’ Remittances:
  One major way we've been pulling in foreign exchange is through our skill labor force in overseas. From 2016 to 2020, Sri Lankans sent home over US$7 billion annually. However, the game has changed with them knowing shortcuts to send money with crypto. Bank remittances dropped to US dollars 3,789 million in 2022 while government now trying deferent plans to counter it.

• Tourism:
  Tourism has been the spotlight of economy since our civil war ended back in 2009. However, it took a hit after the Easter Sunday attacks and COVID. In 2022, we welcomed 719,978 tourists, generating around US dollars 1.1 million. It's a far less what we have got from the glory days of 2018 when we raked in nearly US$4.40 billion. Fingers crossed, we're on the road to recovery!

• Apparel Sector:
  We have renowned brand name for apparel sector as a quality garments producer, hence this sector had contributed 5.4% to the GDP in 2022. However our major buyers are from US and European markets. Unfortunately, economic uncertainties and supply chain challenges have hit everyone in recent years and that affected badly to this sector as well.

👉 Which sector contributes the most to your country's foreign exchange earnings? Why?

High inflation & Uncertainty about the country's future makes more and more skilled workers emigrate. Everyone with proper connections and money leaves the country. However, this is not the way to expect foreign earnings as a country and this could lead to labor shortages in the country in the longer term.

Since the government is trying to survive in the service sector economy rather than production and manufacturing, the best solution is to develop the tourism sector and make it to the top of the list with foreign exchange earnings. However, how we market as a country is another issue here. The average tourist spends US$190 dollars in Sri Lanka but it provides much better service and the attraction.

Sri Lanka is enriched with nature and culture. We have world-class beaches and 07 world heritage sites. It’s a perfect destination to visit and has been nominated as the best destination to travel. I hope the government will see the path and take the necessary decision to turn the fortune wheels for Sri Lanka.

👉 Does your country's foreign reserves depend on this particular sector or are there many other sectors as alternatives?

There are many subsectors which contribute to the overall economy. Special mention should go to Tea, Rubber & Gems & Jewellaries. Fisheries and Aquatic resources also a growing sector. However, none of these sectors haven’t seen the potential growth to overtake the competitive market. Hence basically we depend much on the Workers’ remittances, Tourism and the Apparel Industry.

👉 What kind of problems do you think your country will face If this sector somehow collapses?

To be honest we have seen many collapses than any development. This paradise-like landscapes with almost all the resources is in a deep hole. However, these are the worst it could happen.

• Economic Fallout:
  Back in the days we were riding high with the third-highest per capita income in Asia. Just last year we were brink of declaring bankruptcy. Probably by next 05 years if something didn’t work for us we will be the next case study for many economic students.

• Inflationary Woes:
  What government does meantime? They ban imports to keep foreign currency in-house and it sparked inflation, shooting up prices across our roof. Sri Lanka never had issues with hunger but now most of the population suffers from it.

• International Assistance and Debt:
  To weather the storm, we've reached out to our neighbors for financial support. Bangladesh threw us a $200 million currency swap, China extended a generous $1.5 billion swap, and India committed a hefty $2.4 billion. While these aid packages offer a lifeline, they come at a cost “national debt”. We're not out of the woods yet, and relying on external assistance might lead us down a path of indebtedness.

• Foreign Investment Drought:
  Sri Lanka definitely needs a game changer, and that's foreign investment. Without it, we're stuck in a cycle of depending on remittances and aid. Investors are cautious creatures, and with our economic instability, they might shy away. We risk becoming a nation dependent on the generosity of others, waiting for remittances to pay off debts.

• Brain Drain and Labor Shortages:
  With skilled workers pursuing opportunities abroad our homegrown talent is gradually draining away. Mind you we are just 23 millions. We don’t have that human resource as many nations. If this trend persists, we could face a potential labor shortage and that will decrease our economic growth.

👉 Conclusion

So now you know how bad the situation in Sri Lanka in term of economy. Our only hope is the government steers the ship in the right direction at least now. They have to making sure we're not just a nation waiting for dollars to repay debts, but a nation thriving on its own two feet.

Thank you for this interesting contest @steem4bangladesh. Looking forward to taking on the next week’s challenge. I would like to invite @tenguhatanga, @crisvera & @morgan76 to participate in this contest.

Thank you.

Peace to all 🙏

^{The cover image has been developed by Midjourney and photoshoped by me}

^{Reading references:
Economy of Sri Lanka
Sri Lanka - Asian Development Outlook April 2023
Economic-Statistics-2023
Daily spend of tourists in Sri Lanka}