Remittances soar to 8-month high at $2.16b

Inward remittances have demonstrated strong performance for two consecutive months, with the country receiving over $2 billion each in January and February this year.

In February, Bangladesh witnessed its highest remittance inflow in the past eight months, totalling over $2.16 billion. This significant development provides a welcome relief for the country's diminishing foreign exchange reserves, as noted by bankers.

This figure marked a significant increase of 38.46% compared to the same month last year, according to data from the Bangladesh Bank. In June 2023, the country saw a higher inflow of $2.19 billion.

Bankers say due to the shortage of dollars, some banks buy the greenback at higher rates than the officially declared ones. Moreover, it's observed that the inflow of remittances tends to rise every year during Ramadan.

Sohail RK Hussain, managing director at Bank Asia, told The Business Standard that recent initiatives taken by the Bangladesh Bank have started working slowly.

"For example, simplifying account procedures for foreigners, not asking about income sources, and giving interest on Resident Foreign Currency Deposit (RFCD) accounts have contributed to the increase in remittances. Moreover, expatriates tend to send more remittances during the month of Ramadan," he pointed out.

At present, the announced price for buying remittances is Tk109.50, but businessmen claim that remittances are being bought at rates of up to Tk122.

According to the Bangladesh Bank, the country's foreign exchange reserves stood at $20.57 billion at the end of Sunday. The reserves reached their peak of $48 billion in August 2021, and since then, they have steadily declined.

The managing director of another private bank said while remittances are increasing for some banks, others are experiencing a decrease. One reason for this disparity is the price difference.

He explained that many banks are buying remittances at rates Tk10/12 higher than the fixed price. They purchase these at a higher rate to refinance and open Letters of Credit (LCs) for institutions of their interest.

However, when opening LCs, the charges are applied at a fixed rate. Consequently, even though banks are incurring losses, their directors or related institutions are profiting.

Central bank continues to sell dollars

Despite the increase in expatriate income, the foreign exchange reserves in the central bank have further decreased. This is because of the dollar crisis, which has been ongoing for two years.

The central bank sells dollars from reserves to banks to meet import liabilities. Despite the dollar crisis, the central bank has sold nearly $9.13 billion to banks in the first eight months of the current fiscal year.

However, remittances have increased less compared to the number of workers going abroad. In 2023, a record 1.3 million workers left the country. Last year, remittances through banking channels were $21.92 billion, which is only 2.88% higher than the previous year.

However, this amount of remittances is less than in 2021, mainly due to the significant demand for hundi. Remittances through the banking channel are not increasing as expected.