billion in 1994, i. e. more than 10 % of gdp - an obviously unsustainable situation by any standards, but even more so for a country with a high debt ratio. some of this deficit was covered by direct foreign investment, but the greater part of it was financed by borrowing, as a result of which by the end of 1994 the net external debt had reached 46 % of gdp and the exceptionally high level of more than 160 % of exports of goods and services and unrequited transfers. 2. i have not yet seen the full 1996 figures, but estimates based on the first eleven months suggest a current account deficit of around ( or even less than ) $ 1. 5 billion. this looks much more reasonable, not only because it was more than covered by foreign direct investment but also because of what lies behind this improvement. the $ 2. 5 billion drop in the current account deficit between 1994 and 1996 was made possible ( a ) by a 35 % increase in exports, accompanied by a modest increase in imports of about 14 %, and ( b ) by the steady and rapid increase in services income, mainly ( but not exclusively ) derived from tourism. 3. since there was also a sizable inflow of foreign direct investment in 1995 and 1996, the country ’ s net external debt dropped from $ 18. 9 billion at end - 1994 to about $ 13. 3 billion at end - 1996. net external debt declined to 31. 2 expressed as a percentage of gdp, and to 71. 6 as a percentage of exports of goods, services and unrequited transfers. i have also noted that by 1996 net interest payments on the external debt had dropped to 6. 7 as a percentage of exports of goods and services. the comparable figures were 12 % in 1994 and as high as 17 % in 1990. it is useful to point out that the sizeable decline of the net external debt was made possible by the substantial decline of the public sector deficit from 8. 2 % of gdp in 1994 to 4 % in 1996, while at the same time the share of public sector expenditure in gdp declined from 62 % to a more bearable 51 %. “ growing out ” of the debt service burden is no longer wishful thinking. it is beginning to become a reality. 4. the fact i find most noteworthy is that the $ 2. 5 billion switch of resources towards external use, amounting to some 7 % of gdp, took place without a recession, which

laws relating to this type of activities should not discourage genuine remittance flows through the banking system. nor should they be discriminatory or prohibitive to remitters or receivers. most countries with fully open current and capital accounts have facilitated cross - border transfers than the countries with capital controls. the situation is expected to be improved with the relaxation of exchange controls in both the remittance originating country and the recipient country. there is also a need to monitor and regulate the agencies and other service providers which recruit migrant workers. it is reported that, in some instances, the agencies tend to persuade migrant workers to go for lower wages and salaries or employ them under harsh working conditions. there have also been instances where the agencies or agents take money upfront from workers and have left them in the lurch. remittances through informal channels according to estimates, still 30 – 40 percent of remittances are transferred through the informal institutional networks and private channels. in some instances, informal systems do not transfer foreign currency from the origin / host country to the recipient / home country. arrangements are made to provide funds in local currency at the recipient's end. for example, if a migrant worker in the us wishes to transfer usd 500 to his family in sri lanka, he prefers to go to informal systems like hawala and undial because of the high charges and commissions in the formal banking sector. under the informal money transfer systems, the dollars may stay in the us or get to sri lanka at a later time. the hawala agent's representatives in sri lanka provide sri lankan rupees to the migrant's family speedily and at a relatively low cost. if dollars are retained with the hawala agent in the us, sri lanka's banking sector lose the opportunity of using foreign currency and, therefore, the country does not gain any benefit from the worker remittance. if the hawala agent sends dollars at a very later date to replenish the equivalent of sri lankan rupees, again there is an opportunity cost to the country as foreign currency is not available when needed. there is also a possibility of the hawala agent sending dollars to sri lanka through an un - known courier service, but such dollars may not get to the banking sector at all. it is difficult to institutionalize remittances of illegal immigrants as such immigrants do not wish to identify themselves to the formal banking and financial institutions in the host country. hawala and undial systems are