Declining remittance inflow

According to a recent report published in this newspaper Bangladesh’s remittance inflow – which is already showing a steady decline – could continue on this downward trend in the coming months as banks have decided to lower the USD rate in foreign exchange houses from November 1, economists say.

This decision – taken by the Bangladesh Foreign Exchange Dealers’ Association (BAFEDA) and Association of Bankers, Bangladesh (ABB) on Sunday – will reduce overall earnings through remittance mobilisation, which in turn may discourage inflow from legal channels, the report adds.

For Bangladesh, remittance, a key source of external finance, plays a pivotal role in social uplift. Bangladesh is a favourite destination for cheap manpower in global labour market. In fact, worldwide immigration can craft considerable social welfare gains for migrants in countries from where the workers move and to where they resettle.

Workers’ remittance to Bangladesh now constitutes the single largest source of foreign exchange earnings and plays a critical role in the socio-economic development. Remittance has resulted in improved living standards of workers’ families and helped in improving the income distribution in favour of poorer and less skilled workers.

The power of remittances lies in how they are invested by the families of migrant workers, helping them build up economic and social assets across generations. In countries like Bangladesh, where social safety nets are weak or absent, remittances often form the bedrock of a family’s financial security, on which generational resilience to economic shocks is built. Blindsided by COVID-19, many families have already consumed their private safety net of saved up remittances and they now risk falling back into poverty. It’s time for both the public and private sectors to throw them a lifeline.

Bangladesh is at a crucial stage on its path towards development, and a healthy remittance stream will, no doubt, play a major part in helping us reach our economic goals. A change in policy is needed to tap remittance that hinges on more than just sending money for family maintenance, particularly from the Bangladeshi diaspora.

In a time of financial volatility, remittance from workers abroad is proving to be the lifeline. Since economists have given a bleak picture of the future, with warnings of a recession in developed nations, the priority of the Bangladesh government will be to explore new countries in need of skilled workers.

Remittances serve as lifelines between migrant workers and their families back home, especially during a crisis. These money transfers provide efficient and effective safety nets to people living in the margins of economies. While remittances can shape a country’s trajectory, they are highly dependent on three critical factors: economic opportunities in home countries; the international migration system; and the international financial system.

 Prolonged economic recession will force the return of a significant number of migrants to their countries of origin, aggravating the economic downturn and social disruption and resulting in gender-based violence and societal tensions. The effect of the projected sharp decrease of remittances on households in the country can potentially push back decades of progress made by the region on poverty reduction, income inequality, nutrition, health and education.

Some experts say that recent outflow of a high number of fresh migrant workers is likely to boost inward remittance within a year, but there is a need for enhanced monitoring and a robust campaign highlighting the risk of sending remittance through informal channels.

Experts observe that many migrants prefer informal channels as hundi activities returned to normalcy following improvement in Covid situation. Besides, a significant gap between the official exchange rate of US dollar and that in the kerb market is also a key reason. Several economists said banks are losing fast the advantage they enjoyed at the height of the pandemic when the informal channels mostly remained closed. But as the Covid situation improved, remitters switched to informal channels again.