Remittance inflow – a key source of USD for Bangladesh – reached $1.97 billion in October this year, returning close to the $2 billion mark after two months, and providing a much needed breather to the country amid a persisting greenback shortage and dwindling forex reserves.
This inflow was $1.52 billion in the same month previous year, according to Bangladesh Bank data released Wednesday.
During the first ten months (January-October) of 2023, the country’s remittance inflow stood at $18.01 billion, compared to $17.99 billion recorded in the same period last year.
Bangladesh posted the lowest remittance inflow in August and September of 2023, raising concerns for the economy.
Inflow stood at $1.34 billion in September 2023 – lowest since the country recorded $1.27 billion back in March 2020. When compared year-on-year, remittance fell by 12.72 per cent or $200 million in that same month.
The remittance inflow was $1.59 in August of 2023.
Economists believe that the key reason behind the latest increase in remittance inflow was a higher rate offered by the banks for USD.
Speaking to The Business Post, Policy Research Institute of Bangladesh Executive Director Ahsan H Mansur said, “The banks tried to collect USD from remitters at any cost. As a result, the banks offered a higher rate. This helped boost remittance inflow in October.
"However, the decision to offer 2.5 per cent extra incentive from bank funds is not sustainable for the economy in the long term.”
The treasury head of a private bank, on condition of anonymity, said, “Several banks offered Tk 117 per USD in October due to a greenback shortage. We faced pressure from the board members and the managing directors to collect as much USD as possible from the remitters.”
Another treasury head said, “The system of collecting the remittances should be market-based. We have faced pressure from higher management to collect USD, and as a result, we offered a higher rate to remitters.
“On the other hand, the central bank fined ten treasury heads. The move impacted USD collection through the banking channel."
In October, remitters received Tk 112.75, including the government's 2.5 per cent incentive, as per the Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers Association (BAFEDA) decisions, but several banks did not follow this rate.
ABB and BAFEDA held a meeting on Tuesday this week, and decided that banks can offer Tk 110.50 for remitters.
However, ABB-BAFEDA revised the decision of 2.5 per cent extra incentives from the bank fund. Banks can allow incentives to any percentage before approval from their board, but cannot sell the greenback for more than Tk 111 per USD.
Moreover, banks have to sell 10 per cent of the USD earned from remittances in interbank at Tk 114.
Bangladesh received the lowest amount of remittance since FY20 when the figures are compared to the first quarter of FY24. The country earned $4.91 billion in remittance during the July-September period, which was $4.52 billion during the same timeframe of FY20.
Commenting on the decline, Bangladesh Bank spokesperson Mezbaul Haque had previously said, “It is not possible to say why our remittance inflow has decreased at this moment, but we will analyse the situation, and find out the reasons.”
