Home ›› Economy ›› Remittance
Remittance inflow, a major source of USD earnings for Bangladesh, dropped to a three and a half year low this September, at a time when the country remains laser focused on boosting foreign exchange reserves.
According to Bangladesh Bank data released Sunday, remittance 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 the same month.
The country received the lowest amount of remittance since FY20 when the figures are compared to the first quarter of FY24. Bangladesh 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 told The Business Post, “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.
“We will take action in this regard.”
Economists and bankers say the significant fall in remittance inflow is a matter of concern for Bangladesh, and the key reason behind this decline is hundi – an illegal channel of cross border money transaction.
Remitters prefer hundi because it offers a higher exchange rate compared to the official channel.
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.”
Former lead economist of World Bank Dhaka Office Zahid Hussain said, “The key reason behind falling remittance inflow is the differences in exchange rates between the banking channel and the kerb market.
“Remitters get Tk 112.75 per USD, including an incentive, from the banking channel. But they are getting Tk 117 – Tk 118 in the kerb market. So the difference is almost Tk 5 – Tk 6.”
A senior manager and director of a bank, on condition of anonymity, said, “Most of the businessmen are trying to stash their USD abroad because of uncertainty posed by the upcoming national polls.
“A certain quarter of businessmen are influencing remitters to use hundi.”
Meanwhile, Zahid Hussain said, “Though remittance inflow has fallen, the number of Bangladeshi remitters did not decrease, and the countries they mostly work in are not in any economic turmoil.
“Bangladesh should receive more than $2 billion in remittance every month, if we consider the existing number of expatriates.”
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.
Impacts on reserves, exchange rate
Remittance is a key source of USD for Bangladesh, because a large portion of the export earnings is spent on importing goods for production. Hence, a decrease in remittance inflow means a direct impact on forex reserves – which has been declining steadily.
Reserves fell to $21.14 billion in September this year, compared to $36.5 billion posted during the same month last year. On the other hand, the devaluation of the Taka against the USD continues as a result of dwindling reserves.
The interbank exchange rate has recently been increased to Tk 110.5.
As greenback rates rise, the cost of import payment increases. It should however be noted that overall import payment declined in July as the government curbed imports of luxury goods as part of its austerity measures.
Such payments declined by around 15 per cent to $5.86 billion in July this year.
But the import cost of essential goods is going up more than ever before due to the USD price hikes, despite the declining prices of many products in the international market. So, Bangladesh is unable to benefit from any drop in goods prices globally, experts say.
