Remittances drop by 2.40% in a month

Bangladesh experienced a marginal decrease of 2.40% in inward remittances in November compared to the previous month. This decline may further strain the country's dwindling foreign exchange reserves.

Expatriate Bangladeshis sent $1.93 billion to the country in November; the figure was $1.97 billion in October, according to Bangladesh Bank data.

Despite the month-to-month dip, there is a positive trend, as November's remittances reflect a substantial 21% surge compared to the corresponding month in the previous year. In November last year, when exchange rate volatility was very high, the country received $1.59 billion in remittances.

Bankers attributed the initial rise in November's remittance inflows to favourable dollar rates, saying the subsequent reductions in the rate by the Bangladesh Foreign Exchange Dealers' Association (Bafeda) discouraged expats from utilising official channels for sending remittances.

Central bank data show that expatriates sent $643 million more remittances in October than in September, a 48.2% increase. Remittance inflow hit a 41-month low at $1.33 billion in September.

A private bank's treasury head told The Business Standard that the recent reduction in the dollar exchange rate aims to incentivise individuals having dollars to return them to the banking system. However, if the dollar price is reduced without considering the market situation, the foreign currency inflow could be hindered.

Despite the growing number of expatriates abroad, remittance inflows are not increasing proportionally. Enhanced remittance facilities for expatriates can reduce reliance on informal channels like hundi, thereby directing more remittances through official banking channels, the official added.

According to data from the Bureau of Manpower, Employment, and Training (BMET), the country has sent a staggering 1.204 million workers abroad until 29 November this year, surpassing last year's figure of 1.135 million workers.

Bafeda set the dollar rate for exports and remittances at Tk109.75, while the rate for import settlement was determined at Tk110.25. However, reports indicate that banks are currently buying remittances from expats at a significantly higher rate of Tk123 but are underreporting the rate, said treasury officials of several banks.

According to the central bank report, Bangladesh received $8.81 billion in remittances in the first five months (July-November) of the current financial year 2023-24, only 0.57% more than the previous financial year.

Dr Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem), told TBS that incentives will temporarily increase remittance flows but are not a long-term solution.

"Curbing hundi is crucial for boosting remittance inflows, and stopping hundi requires tackling money laundering. We must implement all necessary measures to control the rampant smuggling of funds abroad," he said, adding that hundi operators will always offer more competitive exchange rates than banks.

The dollar crisis in Bangladesh became evident in March 2022, with the outbreak of the Russia-Ukraine war. To address the crisis, the Bangladesh Bank initially fixed the dollar price, which exacerbated the situation.

Central bank data show that the country's forex reserves stood at $19.40 billion on 30 November.  Bangladesh's foreign exchange reserves stood at $33.85 billion on 29 November 2022.