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Remittance declines despite Eid drawing near

ASM Saad
01 Apr 2024 19:00:52 | Update: 01 Apr 2024 21:28:53
Remittance declines despite Eid drawing near

Remittance inflow – a key source of USD earnings for Bangladesh – declined in March both in terms of year-on-year and month-on-month metrics. Such income usually booms in the country ahead of Eid or any other festive seasons.

According to Bangladesh Bank data released on Sunday, the remittance inflow stood at $1.97 billion in March 2024, a 1.26 per cent drop compared to the same month last year. Besides, this year, the country recorded the lowest remittance before Eid in recent years.

Remittance inflow stood at $2.02 billion in March 2023.

Meanwhile, the remittance inflow decreased by 7.72 per cent in March this year, compared to the previous month. The amount was $2.16 billion in February this year, a higher figure in recent times.

Former lead economist of World Bank Dhaka Office Zahid Hussain said, “The key reason for decreased remittance is the rampant use of Hundi – an illegal channel of cross border money transaction.

“The central bank has also taken many measures to control the USD market. So hundi traders took up different strategies. The central bank is yet to take stricter measures to curb the Hundi malpractice.”

Zahid pointed out, “The remittance inflow exceeded $2 billion in January and February. It was expected that such inflow will cross $2 billion in March, ahead of Eid. Since it did not occur, we can assume that Hundi is the main factor behind the decline.”

An analysis of recent Bangladesh Bank data shows that the remittance inflow was $17.06 billion during the nine months of FY24, which is 6.42 per cent higher year-on-year.

However, if compared to the Covid-19 pandemic period in FY21, income stood at $18.6 billion for the July-March remittance, which was $1 billion higher compared to the same period of FY24.

Mutual Trust Bank Managing Director and CEO Syed Mahbubur Rahman said, “The central bank should take necessary action against hundi. Otherwise, it would not be possible to halt the decline in remittance inflow through the banking channel.”

Speaking to The Business Post, Centre for Policy Dialogue (CPD) Distinguished Fellow Prof Mustafizur Rahman said, “The remittance inflow will get a boost before Eid, but I think the amount of remittance in March has not met expectations.

“Many remitters are using the Hundi method again, especially those who live in the Kingdom of Saudi Arabia (KSA).”

He added, “We will have to observe the indication for another month to see if anything changes. Hundi traders have probably taken different strategies, such as ensuring delivery of the money to the remitters’ families very quickly.”

The remittance inflow of Islami Bank was at $491 million, Social Islami Bank’s inflow $109 million, BRAC Bank’s inflow $125 million and Janata Bank’s inflow $148 million.

Remitters get Tk 113 – Tk 114 per USD, including an incentive, from the banking channel. But they are getting Tk 118 – Tk 119 in the kerb market. So the difference is almost Tk 4 – Tk5.

Bangladesh exported a large amount of manpower after the easing of pandemic restrictions in 2022. During that period, the number of overseas employment was 11.35 lakh – the highest ever in Bangladesh’s history.

In the first eight months of 2023, that number was 8.82 lakh, which was higher than the 2021 yearly figure of 6.17 lakh.

The Association of Bankers, Bangladesh Limited (ABB) and Bangladesh Foreign Exchange Dealers' Association (BAFEDA) had fixed the USD rate in September 2022. That time the banking sector was facing the USD crisis as well.

But ABB-BAFEDA's plan did not work properly in the USD market. Instead the USD market became volatile that time. Bangladesh witnessed the lowest remittance inflow at $1.33 billion in September.

After that, the Bangladesh Bank senior officials and ABB-BAFEDA had fixed extra incentives from the fund of their own banks.