Sri Lanka’s Labor Paradox: Exporting Workers, Importing Builders
Sri Lanka’s construction sector is set to boom in the coming months due to post-Cyclone Ditwah rehabilitation projects. The government has allocated 350 billion Sri Lankan rupees (over $1.13 billion) to rebuild houses and infrastructure that were damaged in the devastating cyclone in November-December last year. The proposed international donor conference is set to bring in more money for rebuilding.
But Sri Lanka’s post-Ditwah rebuilding drive seems to have hit an unexpected snag. Construction firms say they cannot find enough skilled workers at home, and want to import thousands of foreign workers. This is ironic because around 300,000 Sri Lankans leave the country each year in search of work. An estimated 350,000 Sri Lankans are expected to leave the country in 2026.
Remittances reached an estimated $7.8 billion in 2025, surpassing the previous peak of $7.4 billion recorded in 2016. These are not insignificant numbers for Sri Lanka. Remittances, like tourism, have become a central buffer for foreign reserves and balance-of-payments stability.
The fact that Sri Lanka is short of manpower after over a million workers have migrated since 2022 is a warning about what happens when remittances become a pillar of macroeconomic stability. More workers leaving the country brings in higher remittances, but their departure hollows out the productive sectors of the economy.
As with many other labor-exporting countries, it’s in the construction sector that Sri Lanka has started to notice the perils of mass out-migration of workers. After the 2022 economic crisis, the Sri Lankan construction sector came to a standstill. About a million people lost jobs. The sector started hiring again only last year as the National People’s Power (NPP) government recommenced infrastructure projects. But it seems that now there are not enough workers available.
These labor shortages are ironic because Sri Lanka has been sending increasing numbers of people to construction jobs in other countries. For example, workers heading to Israel have been concentrated in agriculture and construction. Another interesting trend is that thousands of Sri Lankans have moved to Eastern European countries that are short of labor because their own youth have left for Western Europe. Ultimately, Sri Lanka, too, is contemplating importing workers.
Most Sri Lankans with some experience in construction, from masons to engineers, leave because domestic salaries are low. Skilled workers also leave for higher and more stable earnings and better working conditions. The construction sector in Sri Lanka is also vulnerable to payment delays and public investment cycles that have become unpredictable. This volatility, added to low pay, makes construction less attractive to new entrants and encourages skilled workers to leave rather than gamble on domestic continuity. When the Gotabaya Rajapaksa and Ranil Wickremesinghe governments halted public works, many workers left the country or shifted to other work, probably in agriculture. Three years later, when construction work has picked up with increased public investment, the labor pool is no longer there.
Sri Lanka is among a number of countries facing a similar predicament. In Croatia, another country known for outward migration, jobseekers are at an all-time low and more than half of the construction companies reported worker shortages. Croatia has responded with greater reliance on foreign labor. Closer to home, Nepal, too, faces a similar situation. Remittances have been central to Nepali household income and macro stability. But out-migration has exacerbated domestic labor shortages, particularly in agriculture and land management, lowering productive capacity at home.
According to a recent Reuters report, over 110,000 houses were damaged due to Cyclone Ditwah. Rapid rebuilding is vital for both social stability and economic recovery. If rebuilding drags, despite colossal sums allocated by the government, poverty will deepen and economic activity will slow, delaying recovery. But accelerating construction by importing foreign labor can lead to social tensions and derail domestic workforce development.
The question before the NPP government is whether they will continue to encourage Sri Lankans to leave to stabilize the balance of payments situation, while importing a few thousand workers. In the short term, the answer may be yes. Sri Lankan families need money; the government needs foreign exchange; and companies need workers immediately.
But over time, this model can become self-reinforcing and can spread to other sectors. With cheap migrants, Sri Lankan wages would remain uncompetitive because there is no need to improve productivity. Skilled workers would keep leaving and importing labor would become normalized.
Sri Lanka is vulnerable to climate shocks, and things will only worsen in the coming years. Ditwah is most likely a prelude to what is on the horizon.
National resilience is built by having enough skilled people at home when disaster strikes. It is time that the state realizes that its dependence on remittances, at the cost of hollowing out productive sectors, is making the country more fragile every year to future climate shocks.
