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The inflow of remittance to Bangladesh has fallen further this February despite increased incentives from the government, and experts blamed the return of “hundi” system – an illegal method of cross border transaction – for this decline.
The latest data from the central bank shows that Bangladeshi expatriates sent $1.5 billion in February 2022, a 16 per cent drop when compared year-on-year. February’s figure is 12.22 per cent lower than the previous month when remittance inflow stood at $1.7 billion.
During the July-February period of the current fiscal year, Bangladeshi expatriates sent $13.44 billion as remittance, down from $16.68 billion during the same period of FY21.
On January 1 this year, the government increased cash incentive on remittance to 2.5 per cent from 2 per cent to encourage sending forex through legal channels, with goals to improve the people’s living standard, boost forex reserves, check money laundering and generate jobs.
Speaking on the issue, Zahid Hussain, former lead economist of the World Bank Dhaka office, said, “The remittance inflow in Bangladesh had increased amid the pandemic due to the collapse of informal channels, such as the hundi system, due to travel bans across the globe.
“Bangladesh received record remittance at that time. But the hundi system gradually made a comeback after the Covid-19 travel restrictions eased, and this may be the key reason behind the downward trend of remittance inflow.”
Hundi transactions might be reaching $4 billion to $5 billion annually, he said, adding that the crisis triggered by the Ukraine-Russia war might have disrupted the legal channels for sending remittance.
Zahid expressed optimism that the increasing global demand for unskilled labourers in the post-pandemic period may create an opportunity for Bangladesh.
Other reasons for downward trend
Shariful Islam Hasan, programme head at the BRAC Migration, said, “The current global situation is still not favourable to manpower exports abroad. Seventy-five per cent of total migration happens in Saudi Arabia, but the airfares at this destination are very high now.
“As a result, the cost of migration has gone up significantly. Besides, before the pandemic, around 50,000 – 60,000 Bangladeshi expatriates used to return home annually. But amid the pandemic, around five lakh had come back home.”
Banks’ liquidity impacted
Mutual Trust Bank’s Managing Director Syed Mahbubur Rahman said, “Bangladesh’s banking sector is already facing a liquidity shortage. We are not getting deposits even at a six per cent interest rate.
“Lower trend of remittance, rising trend of import, and increasing trend of private sector credit growth have impacted the banks’ liquidity.”
The declining trend of remittance has also put pressure on the foreign exchange market as banks are now facing a shortage of USD to pay import bills. As a result, the Bangladesh Bank is continuously injecting USD into the country’s banks.
The Bangladesh Bank sold $3.15 billion to the banks between July and January of the current fiscal year. The interbank exchange rate stood at Tk 86 per USD till Tuesday, up from Tk 84.8 in March last year, as per BB data.
