Remittances hit 7-month high at $2.10b in January

Remittances to Bangladesh surged 7.69% year-on-year to $2.10 billion in January, marking the highest monthly inflow in the past seven months.

According to data from the central bank, $1.98 billion arrived in December. Additionally, $2.19 billion arrived in June last year, which is the highest for a single month.

Bankers say many banks are facing dollar shortages and are therefore keen to collect the greenback from expatriates. Additionally, the overall amount of remittances has increased as some banks are collecting dollars at a higher price than the declared rates.

At present, the announced price for buying remittances is Tk109.50, but bankers said remittances are being bought at rates of up to Tk122. Despite an increase in remittances, reserves fell to below $20 billion. Reserves stood at $19.94 billion at the end of Thursday, which was above $20 billion at the end of the previous day.

Earlier in August 2021, the reserves had reached a record $48 billion. Since then, reserves have steadily declined.

In the first seven months of the current fiscal year, expatriates sent remittances of $12.89 billion, reflecting a 3.53% year-on-year increase.

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

He explained that many banks are buying remittances at a rate 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.

Sadiq Ahmed, vice chairman of the Policy Research Institute, told The Business Standard, "If our remittances are to increase, we have to leave this rate to the market."

He suggested that the current remittance rate for expatriates, if left to the market, may increase by Tk10. However, in that case, the government will no longer need to provide incentives to this sector using tax money.

Central bank continues to sell dollars

Meanwhile, despite the increase in expatriate income, the foreign exchange reserves in the central bank have further decreased. This is because the dollar crisis, which has been ongoing for two years, has not yet ended.

The central bank sells dollars from reserves to banks to meet import liabilities. Despite the dollar crisis, the central bank has sold nearly $8 billion to banks in the seven 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.

The Refugee and Migratory Movements Research Unit (RMMRU), a private research institute in the immigration sector, stated in a press conference on Wednesday that more than 13 lakh workers left Bangladesh for different countries last year.

This marks the highest manpower export in any single year in the country's history. Overseas employment increased by 13% in 2023 compared to the previous year. However, expatriate income increased by only 2.88%. Taking inflation into consideration, expatriate income has not increased significantly.

Despite the increase in male workers, the export of female workers decreased by 27% compared to the previous year.