'Sending money through legal channels boosted remittance inflow'

The recent remittance inflow went up in Bangladesh amid the coronavirus pandemic due to coming through a formal channel instead of an informal process.

“No significant change is discernible in terms of sourcing of Bangladesh’s remittances. The plausible reasons for robust remittance flow during the pandemic months are –Higher demands by remittance-receiving households for cash in view of adverse effects of the pandemic in terms of erosion of income and employment opportunities; larger flows through formal channels in view of difficulties faced by informal channel (hundi) operators during the pandemic,” economist Dr Mustafizur Rahman told a webinar.

Distinguished Fellow of Centre for Policy Dialogue (CPD) Prof Mustafizur read out the presentation while Convenor of Citizen’s Platform for SDGs, Bangladesh Dr Debapriya Bhattacharya presided over the function.

Dr Mustafizur mentioned the positive impact of the 2 per cent incentive on remittance. Bangladesh Bank had raised the ceiling of sending remittances without supporting document to US$ 5,000 for purposes of incentive, from US$ 1,500 in July last year.

“bKash and some other mobile transfer platforms are paying an additional 1 per cent which may have also encouraged larger flows, and additional disposable money kept for “hajj”, which was not spent in 2020, may have been sent back home,” he added.

He said the global remittance flow to low- and middle-income countries in pre-covid 2019 was US$ 554 billion. In the backdrop of the pandemic, the World Bank, in April last year predicted the sharpest decline in remittance flows in recent years, for 2020.

In 2020 remittances were projected to come down by 19.7 per cent, to $445 billion. A fall of 22.1 per cent was predicted by the WB for South Asia, to US$ 109 billion, after a rise of 6 per cent in 2019.

“During the July-December 2020 period, the growth rate was 38 per cent higher than the corresponding period of pre-pandemic 2019,” Mustafizur said.

He said the government had allocated 3060 crore taka in FY 2019-20 budget for incentives for sending remittance. In FY 2020-2021 budget, the same amount has been kept for this. The government will need additional money in view of the increased remittance flows. Seventy per cent of the allocated funds are estimated to have been already paid out in the first six months of FY 2021.

“Our projections indicate that the government will need an additional amount of about 1,300 crore taka in FY 2021 for the incentives,” he added.

According to the most recent ‘Cost of Migration Survey’ of July 2020 by the BBS, the average migration cost per person in Bangladesh was 4.17 lakh taka. This was equivalent to 17.6 months earnings of average migrant workers.

“We need to keep in mind the issue of the high cost of migration and net welfare benefits enjoyed by remittance-receiving households. If we consider that about 7.4 lakh workers left annually during the 7th FYP, total migration-related expenditure annually was about US$ 3.7 billion, about 24 per cent of the average annual remittance flow during 7FYP (US$ 15.5 billion),” he added.

The noted economist said Bangladesh will need to address the issue of exorbitantly high sending cost with the urgency that it deserves, and not just consider how much remittances are flowing to the country. SDG 10.7.1 obligates countries to work towards significantly reducing the sending costs of migrant workers.