Remittances grow by 10% in FY24 – the second highest in history
Bangladesh has witnessed increased remittance inflow in recent months, with earnings crossing $2 billion in June, May and April consecutively
Remittance inflows into Bangladesh increased by 10.66% year-on-year in the just-concluded fiscal year, supported by factors including increased manpower exports and a rising dollar rate.
Md Mezbaul Haque, spokesperson for the Bangladesh Bank, said the country's banks received remittances amounting to $2.54 billion in June – the highest in 47 months.
According to data from the central bank, $23.91 billion arrived in the country in FY24, which ended on 30 June, compared to $21.61 billion in the previous fiscal year.
Bangladesh recorded its highest remittances during the Covid period in FY21, amounting to $24.78 billion. Consequently, remittance inflows in the just-concluded fiscal year were the second highest in history.
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Stating that remittance growth has been good, Fahmida Khatun, executive director of the Centre for Policy Dialogue, emphasised the importance of the dollar rate in remittances.
"Those who send remittances through formal channels have benefited from the increase in the dollar rate under the crawling peg system," she said, adding that one reason for the increase in remittances in June was Eid.
She said efforts should focus on maintaining this continuity of remittances in the coming months as well.
The economist said the FY25 budget has estimated dollar price at Tk114, which is much lower than the current rate.
"We also need to consider other countries in our region. Our neighbouring countries are not appreciating their currencies, and we are not in a position to do so either. It's important to bear in mind that remitters and exporters will suffer if the dollar value is forcibly pegged at a lower level," she added.
Mezbaul Haque told TBS that banks have launched various campaigns to increase remittances. Additionally, the attractiveness of investing in the local market and the efforts of law enforcement agencies to curb informal money transfers have also contributed to the rise in remittances.
Moreover, adjustments in the dollar price have affected the growth of remittances, he added.
According to data released by the central bank up to 28 June, state-owned banks are performing well in terms of remittance income. Agrani, Janata, and Rupali each brought in over $100 million in remittances. Janata Bank was the only one among these banks to cross $100 million last May.
Additionally, like other months, private banks led in remittance income in June. Among them, Islami Bank received the highest remittance of $519 million, with BRAC, Social Islami, National, and City also receiving substantial remittances.
When asked about the increase in remittances in June, Syed Mahbubur Rahman, managing director and chief executive officer at Mutual Trust Bank, told TBS that since the official dollar rate had been close to the market rate for the past two months, expatriates were encouraged to send remittances through formal channels. Eid-ul-Adha also triggered the growth.
Referring to the robust remittance growth in FY24, the banker said, "Our manpower exports have increased significantly over the years. However, despite this export growth, we have not seen the expected growth there. Therefore, banks need to focus on increasing remittance income. Overall, remittance growth in the just-ended financial year was better than in the previous two financial years."
Analysing central bank data, it was found that the official price of the dollar at the beginning of FY24 was Tk108.70. At that time, the central bank used to determine the dollar rate through two organisations: the Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers Association (Bafeda). However, commercial banks traded dollars in the market at rates higher than those fixed by these organisations.
Later, the Bangladesh Bank increased the dollar rate in phases until the first week of May, reaching a record high of Tk7 under the crawling peg system on 8 May. The mid-rate of the dollar was set at Tk117 during the introduction of this new exchange rate system. Banks were instructed to trade dollars at a rate close to the mid-rate, although no specific band was provided.
Officials at several public and private banks reported that remittances totalled about $2 billion in July, the first month of the just-concluded fiscal year. During this period, the ABB, and the Bafeda set different rates for remittances, exports, and imports, causing hesitation among banks.
Additionally, due to pressure from deferred import payments, many banks acquired remittance dollars at higher prices. However, in August and September, the central bank initiated crackdowns on banks purchasing remittances at inflated rates, resulting in a drastic drop in remittances during those months. Specifically, remittance income fell to $1.33 billion in September.
The managing director at a private bank said remittances declined in August and September due to banking pressures, which concerned the central bank. The senior officials of the central bank, including a deputy governor, urged banks not to offer higher dollar rates but did not impose punitive measures. Consequently, remittances began to increase again from October onward.
Remittances have shown significant growth in recent months, particularly in May and June, as the central bank aligned the official dollar rate closer to the market-based rate and maintained a somewhat tolerant stance, he added.
