Remittances dip below $2 billion after two months

TBS Illustration

After two consecutive months of upward trend, the flow of inward remittances dipped below the $2 billion mark in March amid the weakening of the dollar against the taka. Bankers say this depreciation in the dollar's value discouraged expatriates from utilising the banking channel to send their hard-earned money back home.

Data from the Bangladesh Bank show expatriate Bangladeshis sent home $1.99 billion last month, down from $2.16 billion in February and $2.11 billion in January.

For most days in March, the exchange rate of the US dollar declined to Tk112.50-113, from Tk120-122 during the previous two months, added bankers. 

According to central bank data, March's remittances were 1.24% lower than the $2.02 billion received in the same month a year ago. 

Managing directors at several banks have attributed the decline to multiple reasons.

Firstly, the dollar rate of remittances in March was lower than in previous months, as demand for dollars in banks was slightly lower than before. As a result, remitters also sent fewer dollars to the country in the hope that the dollar rate would naturally rise. Besides, they commented that the remittance decreased in March due to some other reasons, including the increase in dollar transactions in hundi. 

Secondly, unemployment rates have been higher than normal in many countries around the world for the past few months. As a result, money sent by remitters from those countries has decreased slightly.

Syed Mahbubur Rahman, managing director and chief executive officer at Mutual Trust Bank, told The Business Standard that there are still a few days left in the month of Ramadan. Accordingly, remittances are likely to increase in the first week of April.

Bankers say the dollar rate for remittances has risen by Tk1-2 in the last two days. Currently, they added, banks are buying remittance dollars at a maximum rate of Tk114-115. 

Rahman said it would be premature to comment on the increased rate of remittance dollars, adding, "The rate may increase or decrease slightly for a day or two. We will have to wait for some more time to comment on this."

According to central bank data, private banks received $1.69 billion in remittances in March. Among them, Islami Bank brought in the highest remittance of $492 million, followed by BRAC Bank and Trust Bank. Apart from this, state-owned banks received $262 million, and specialised banks received $35 million.

In the first eight months of the current fiscal year, importers opened Letters of Credit (LCs) for $46.44 billion, as shown by Bangladesh Bank data. In contrast, LC settlements amounted to $51.49 billion. That is, the liability of deferred LCs that were imported earlier but were due for payment is reduced by more than $5 billion.

Senior officials at the central bank observe a reduction in dollar demand due to a decline in the liability of deferred LCs.

The managing director at a bank said due to various reasons, including restrictions imposed by the central bank and a reduced money supply, the demand for opening import LCs is less than before. Because of these reasons, the demand for dollars has also decreased.

"However, traders cannot predict how the dollar price will be in the future. That is why they are more interested in opening sight LCs instead of opening deferred LCs. As banks have dollars in hand, they are also opening sight LCs," he added