Home ›› 24 May 2022 ›› Front
The government has withdrawn the provision of mandatory submission of documents for getting incentives against incoming remittance of $5,000 or Tk 5 lakh and upward, in a move to encourage greater remittance inflow and boost foreign exchange reserves.
As a result, the migrant workers will now get a 2.5 per cent instant incentive for any amount of remittance sent in the official channel, without submitting documents to the foreign exchange houses abroad.
The Foreign Exchange Policy Department of Bangladesh Bank (BB) issued a circular in this regard on Monday, withdrawing the document submission obligation until further notice and asking all scheduled banks to execute the decision from May 23.
Experts said this move will only increase the remittance inflow and in turn enhance the forex.
However, they said the government should remain alert so that the country’s money does not re-enter after being laundered abroad in the first place.
Noted economist Dr AB Mirza Azizul Islam said, “This is a good decision. A higher amount of remittance will now come through the proper channel. This was needed to increase the size of forex reserves.”
Taking to The Business Post, Centre for Policy Dialogue’s Distinguished Fellow Professor Mustafizur Rahman said it should be ensured that this facility will not create another opportunity for black money whitening.
“BFIU will have to increase surveillance so that money cannot leave the country and return while cashing in the incentive,” he added.
Bangladesh received $2.09 billion in remittances in April, the highest in a month of this financial year. During this month, until May 19, around $1.31 billion came in.
In this fiscal so far, the country has received $18.62 billion in remittances.
Sector insiders say the inward remittance flow has decreased as the hundi and other illegal channels became active after the Covid-19 pandemic-induced travel ban was withdrawn.
In FY2020-21, Bangladesh had received $24.77 billion in remittance, so far the record high in a fiscal year.
Focus on forex reserves
Mustafizur said that, during the Covid-19 pandemic, the government had increased the remittance amount to be sent without documents from $1,500 to $5,000. “This was a boon for small remitters.
“But we don’t know exactly how many remitters there are who send over $50,000 to the country. This needs to be brought under the scanner.”
In the outgoing fiscal, the government had allocated Tk 4,000 crore for remittance incentives. In the first nine months (July-March), the government spent Tk 3,200 crore.
If the decision to withdraw the document submission obligation boosts the inflow of remittance, the government will have to increase the amount of allocation for the incentive — which may create some additional pressure on the next national budget for the upcoming FY2022-23. But experts are not worried about that since an increased remittance inflow will hopefully bring an end to the dollar crisis.
“Since the government needs to focus on growing the forex reserves, it will have to handle this extra pressure,” said Azizul.
Until August 2021, Bangladesh’s forex reserve was at $48 billion. That came down to $41 billion on May 10 after import costs went up.
But the reserves managed to bounce back to $42.33 billion on May 18.
The government encourages sending remittances in the legal format as demand for foreign currency has grown due to the rising import payments.
Bangladesh is witnessing an increasing import of capital machinery, industrial raw materials, LPG-fuel oil and commodities swelling the import payments. Besides, the deferred payment of LCs (letter of credit) done during the severe pandemic is scheduled for payment now.
According to the BB, over $68 billion worth of LCs were opened in the first nine months of FY2021-22.
