Remittance inflow from the Kingdom of Saudi Arabia (KSA) – a top destination for Bangladeshi workers – has declined year-on-year by 17.18 per cent to $3.76 in FY23, amid continued struggle with dwindling forex reserves and global economic headwinds.
Manpower exports to the KSA have increased in recent years, but remittance inflow from this Middle Eastern country has been on a downward trend since FY22. Wage earners remitted $4.54 billion in FY22, which was 21.58 per cent of the total inflow recorded that year.
The figure posted in FY23 – a decline – was 17.39 per cent of total remittance income of that year.
In FY24, wage earners remittance inflow from KSA was $307.5 million, $291.36 million, $216.15 million, $250.73 million and $194.40 million for the months of July, August, September, October and November respectively.
In July-November period of FY24, total remittance inflow was $12.60 billion.
KSA is a major source for Bangladesh’s remittance income and a key manpower export destination. The total number of manpower in that country is 57,32,462 until November this year, which is 35.7 per cent of Bangladesh’s total expatriates.
In July, August, September, October, and November, the number of manpower exported to KSA was 39,583, 40,619, 43,142, 52,917, and 49,092 respectively.
Industry insiders blamed hundi – an illegal system of cross border transactions – for the decrease in the inflow of remittance from KSA. Migrant workers remit money through hundi instead of the banking channel, thereby depriving Bangladesh of much-needed revenue.
Speaking to The Business Post, a central bank senior official said on condition of anonymity, “The Bangladesh Bank wants to boost the inflow of remittance through the banking channel. But the remittance rate is frequently being changed by ABB and BAFEDA.
“This has created issues for the country’s economy as well.”
Policy Research Institute of Bangladesh (PRI) Executive Director Ahsan H Mansur said, “Many influential people are involved in the hundi trade. As a result, the central bank cannot take firm action against them.
“But it is possible for law enforcement agencies and other regulators to track those facilitating the hundi system.”
He added, “Those involved in hundi are laundering money from the country through under-invoicing and over-invoicing. Besides, the inflow of remittance from KSA has dropped due to the upcoming national polls.”
Wage earners remittance inflow, during the first eleven months (January-November) of 2023, the country’s remittance inflow stood at $19.58 billion, compared to $19.94 billion recorded in the same period last year.
Bangladesh posted the lowest remittance inflow in August and September of 2023, raising concerns for the economy.
Dr. Zahid Hussain, former lead economist of World Bank Dhaka Office, told The Business Post, “We actually have no stable policy. This instability has made the Bangladesh Foreign Exchange Dealers Association (BAFEDA) and Association of Bankers, Bangladesh (ABB) rate irrelevant. Banks are buying remittances at high prices.”
According to bank sources, various banks are buying remittance at a rate exceeding Tk 120 from exchange houses. In this situation, the central bank strictly asked the bank to stop buying remittance at higher rates, as they should offer the official rate.
The official rate for remittance is now Tk 109.75. Besides, a remitter can get 2.5 per cent incentive, and banks will be able to offer an additional 2.5 per cent incentive. As such, the beneficiary of a remitter is getting a maximum of Tk 115.30 against per USD.
Bangladesh received the lowest amount of remittance since FY21 when the figures are compared to the first five months (July-November) of FY24.
The country earned $8.81 billion in remittance during the July-November period, compared to $10.89 billion in the same timeframe of FY21.