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Bangladesh’s manpower exports witnessed a rising trend in the last few fiscal years, but remittance inflow had not increased on par with the posted figures.
The Covid-19 restrictions escalated in FY21, and directly impacted the country’s manpower exports. But the sector has recovered strongly, evident by the fact that Bangladesh sent 11,37,926 workers overseas in FY23 alone.
Manpower exports jumped by 68.59 per cent but remittance inflow increased only 31.6 per cent between FY19 and FY23. Remittance however has been hovering near $21 billion annually for two consecutive FYs.
In comparison, Bangladesh had received $24.77 billion in FY21 – when the pandemic hit the global economy the hardest, show data from the Bangladesh Bank and Bureau of Manpower, Employment and Training (BMET).
Experts say Bangladesh’s remittance inflow has not been on par with the manpower export growth because a large portion is coming through informal channels.
Remitters prefer such channels as it allows them to bypass the non-favorable exchange rate – a result of Taka’s stronger position against the USD. In FY19, Bangladesh’s nominal exchange rate for the greenback was Tk 84.02, but the real effective exchange rate was Tk 106.38.
Due to the ongoing USD shortage, the nominal and real effective exchange rates had mostly stabilised in FY23. But it had little to no impact on the remittance inflow.
Speaking to The Business Post, Centre for Policy Dialogue (CPD) Distinguished Fellow Prof Mustafizur Rahman said, “Many who returned home during the Covid-19 crisis have gone back to their workplaces. Besides, post-Covid manpower exports have increased significantly.
“But remittances are not growing proportionally because it is coming through informal channels. As there was less money available officially against USD, many avoided the system. Remitters were not convinced even after the government announced a 2.5 per cent incentive.
Zahid Hussain, former lead economist of World Bank Dhaka Office, said, “The remittance inflow can be better calculated if we had average data on individual remitters, but such information is unavailable.
“Low remittance compared to exported manpower indicates a widespread use of informal channels.”
He added, “The key reason behind this phenomenon is that the gap between the informal and the formal market is widening. A report by South Asia Economic Focus says if the difference increases 1 per cent, remittances will fall by at least 3.5 per cent.”
How can remittances go up?
The Bangladesh Bank had recently warned some banks that no remittance can be disbursed above the fixed rate of Tk 108 per USD. But some banks paid up to Tk 112.
To counter such malpractice, Zahid Hussain recommended leaving the exchange rate to the market, which in turn will ensure a level playing field.
He added, “This move will help reduce the USD rate gap between the informal and formal markets. Authorities should keep working to curb money laundering as well.”
CPD’s Mustafizur Rahman said, “Remitters using formal channels should get more facilities, and Bangladesh should boost the export of skilled labourers. Initiatives should be taken to stop hundi – an illegal system of cross-border transactions – by making bilateral agreements with destination countries.
“Strict action should be taken against those who facilitate illegal channels for sending remittance in the country.”
Potential inflow up to $30b
Bangladesh exported a lower number of workers amid the Covid crisis in FY21, but the remittance inflow that year was the highest ever recorded in the country. During the period, manpower exports stood at 1,33,365, and remittance income was $24.77 billion.
According to a study by Refugee and Migratory Movements Research Unit (RMMRU) on remittance inflow during the pandemic, the amount Bangladesh received through formal channels during the crisis is the actual amount the country should receive annually.
Amid the pandemic restrictions, remitters had to rely mostly on formal channels as cross border movement and transportation systems were mostly suspended. Illegal cross border transactions almost came to a halt at that time.
Echoing the same, Zahid Hussain said, “Due to the boom in manpower exporters after the Covid crisis, remittance inflow should be $24 billion every year.”
Economist Mustafizur Rahman however thinks that the amount should be more.
He pointed out, “Manpower exports exceeded 2 million in FY22 and FY23. As such, the potential remittance inflow in the FY23 was $30 billion. Since it did not happen, it can be said that remittances are entering the country mostly through illegal channels.”
