Currency moves cause UAE expat workers to feel the pinch
Kumudu Malani sends the Dh2,000 monthly salary she earns cleaning flats in Abu Dhabi straight home to Sri Lanka.
Her food and accommodation are provided by her company.
But currency appreciation at home means the money she sends back is worth less than it was six months ago.
"I have two children. I use it for education only," she said. "Now my daughter is learning computer graphics. She has finished two years and has one more year to go."
The currency appreciation that is squeezing the finances of Ms Malani is affecting thousands of expatriate workers across the Emirates, especially her fellow Sri Lankans, Bangladeshis and Filipinos, and leading to louder demands for wage rises.
In the past 12 months, the value of Ms Malani's remittance has fallen by 2.6 per cent as a result of the strength of the Sri Lankan rupee against the dirham.
For expatriates from Bangladesh, which was hit by a cyclone last week, the problem is particularly acute. The Bangladeshi taka has appreciated by 4.5 per cent against the dirham, reducing the amount that migrant workers are able to send home to their families.
During the same period, the Philippine peso has rallied by 4.6 per cent against the dirham, as the Philippines' government debts are upgraded by ratings agencies to "investment grade" status and capital flows into the country.
Partly because their earnings are now worth less in their home countries, workers at some Arabtec sites went on strike over demands for higher pay on Sunday. Arabtec said the strikers were primarily Bangladeshi.
On Tuesday, the Federal National Council heard concerns from a member from Dubai, Hamad Al Rahoomi, that calls for higher wages from domestic staff were "exploiting" Emiratis because the minimum wage agreements had been set by the embassies of countries that supply large numbers of domestic staff. His calls were rebuffed by Sheikh Abdullah bin Zayed, the Minister of Foreign Affairs.
The needs of families receiving remittances were the biggest factor behind how much is sent home, said Philippe Dauba-Pantanacce, the senior economist for Turkey, the Middle East and Africa at Standard Chartered.
"Traditionally, what has been driving remittances is more the economic fate of the receiver [home countries] or emitter [host country-worker abroad] than the FX [exchange] volatility, even if the latter has obvious repercussions on the end amount received," he said.
Cost-of-living increases also go some of the way towards explaining calls for higher wages. Last month, UAE consumer prices rose by 0.9 per cent compared with the same month a year earlier.
Not everyone is exposed to inflation in the same way, particularly given that housing costs account for a large proportion of the basket of goods and services used to track inflation, Mr Dauba-Pantanacce added. People who tend to be on the lower end of the wage scale, such as domestic workers, manual labourers, security guards and retail staff, are often provided with accommodation in the UAE.
"The muted price recovery in the housing sector so far has kept a lid on the headline CPI [consumer price index] whose other components have been much more volatile indeed," he said.
"Someone that has no or controlled exposure to housing prices will be, for example, much more affected by the variations in food prices, which in proportion represent a much bigger share of its average purchasing basket."
A positive sign for some workers comes from data released by the Statistics Centre Abu Dhabi. Hourly rates for electricians were Dh16 last month, 33 per cent higher than the same month a year earlier, and Dh11 for steel fixers and carpenters, representing a 37.5 per cent increase during the same time period.
For Ms Malani, her salary, she says, is "enough" to cover her family's needs. But she has been working in the Emirates for just seven months.
During the past decade, the UAE's consumer prices have risen by 60.7 per cent, according to IMF data, meaning that a salary agreed in 2003 now buys two fifths of what it did then.
Updated: May 24, 2013 04:00 AM