Monday, April 29, 2024
Bangladesh’s remittance inflow – a key source of USD – reached $2.17 billion this February – hitting the two billion mark for two consecutive months.
Confirming the development on Sunday, Bangladesh Bank sources say the remittance inflow rose year-on-year by 39.10 per cent this February. Besides, the month’s remittance stands at an eight-month high. The country’s remittance inflow stood $2.10 billion in January.
Economists had criticised the fact that the country was not able to exceed the $2 billion mark in monthly remittance inflow during the July-December of FY24. But Bangladesh managed to do so in January and February this year.
Centre for Policy Dialogue (CPD) Distinguished Fellow Prof Mustafizur Rahman otld The Business Post, “Monthly remittance stayed below $2 billion in the first half of FY24. But it is good for the economy that the inflow exceeded this mark for two consecutive months.”
“I think this was possible as banks are offering an extra 2.5 per cent incentive from their funds, resulting in a boosted inflow of remittance for the last two months. But the banks will have to stop giving extra incentives to check the costs.”
However, the hundi trading system must be stopped. Otherwise this sector will not be stable, he pointed out.
Association of Bankers, Bangladesh Limited (ABB) and Bangladesh Foreign Exchange Dealers' Association (BAFEDA) had fixed the remittance rate at Tk 109.50.
On condition of anonymity, the head of treasury at a bank said, “Official remittance rate is Tk 109.50, but most of the banks are offering their customers Tk 116 – Tk 120.
Dhaka Bank Managing Director and CEO Emranul Haque said, “The USD rate has stabilised, so banks are not holding USD right now. As a result, the USD market is normalising. The rate is also a factor in increasing the inflow of remittance.
“So right now, the USD rate is satisfactory for the remitters, and they had sent more remittances through the banking channel in January.”
Dr Zahid Hussain, former lead economist of World Bank Dhaka Office, said, “We had seen the remittance inflow crossing $2 billion several times during the Covid crisis. This phenomenon indicates that the country has the capability to gain over $2 billion remittance every month.”
An analysis of regulator data shows that during the July-February period of FY24, remittance inflow stood at $15.07 billion, which is 7.57 per cent higher compared to the same period previous year.
In the July-February period of FY23, the amount stood at $14.01 billion.
The central bank has been taking a number of initiatives to boost remittance inflow in the country, but regulator data show these moves have largely been ineffective except in January and February.
Experts think that the forex market has become stabilized now. So the inflow of remittance has increased gradually.
The ABB and BAFEDA have been setting the exchange rates since September 2022 as per Bangladesh Bank decision.
On condition of anonymity, a senior central bank official said, “The banks are not following this rate. Most of the banks are offering their own rate to remitters in recent times.
“Currently, the banks are buying remittance at Tk 122 – Tk 124 from remitters and exchange houses, so it is clear that ABB-BAFEDA’s rate is not effective in the banking sector. This official rate disrupted the remittance inflow as well.”
He also said the central bank frequently changes their decision on the remittance rate. Sometimes, the regulator asks the banks to collect the USD under their own offer rate, and sometimes they ask to follow ABB-BAFEDA's rate.
Beneficiaries get Tk 109.75 per USD with 2.5 per cent incentive from the government and additional 2.5 per cent from the banks, while the informal markets are offering up to Tk 123 – Tk 124.
