Remittance flow to Bangladesh rose to a five-month high in January as banks have made an all-out effort to mobilise US dollars from abroad to overcome the stress in the foreign exchange market.
Expatriates sent home $1.95 billion last month, the highest since September when $1.53 billion flew into the country, data from the Bangladesh Bank showed.
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January’s receipts were nearly 15 per cent higher than December’s $1.69 billion and 14.9 per cent from $1.70 billion recorded in the same month last year.
A central banker described the rising flow of remittance as a positive sign for Bangladesh, which needs a higher supply of US dollars to tackle the instability in the foreign currency market.
Owing to the shortage of American greenback, the forex reserves are declining, the taka has lost its value by about 25 per cent in the past one year, and inflation has been at elevated levels for nearly a year.
“The robust inflow of remittances in January has given a breathing space to both the government and the central bank to manage the ongoing crisis in the foreign exchange market,” the central banker said.
The reserves have fallen alarmingly in recent months, creating difficulties for businesses to clear import bills. The reserves stood at $32.29 billion on January 25 in contrast to $45.15 billion a year ago.
The higher inflow of remittances has indicated that the volatility may ease in the days ahead.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, says that almost all banks have given huge efforts to increase the inflow of remittances.
“Banks are running campaigns among expatriate Bangladeshis to encourage them to send their hard-earned money through formal channels. This has put a positive impact on remittances.”
The Bangladesh Foreign Exchange Dealer’s Association, an organisation of banks that implement forex-related policies, and the Association of Bankers’ Bangladesh, a platform for managing directors of banks, have recently decided to collect remittances from foreign exchange houses at Tk 107 per USD.
A managing director of a bank, however, says that some banks have offered more than the ceiling. “So, some banks have managed to receive more remittances than others.”
Between July and January, expatriate Bangladeshis sent remittances amounting to $12.45 billion, up 4.25 per cent year-on-year.
However, the flow of remittance is still lower than expected given that a record number of Bangladeshis went abroad in 2022 in search of jobs.
More than 11.35 lakh Bangladeshis left the country for jobs abroad last year, the highest in history, data from the Bureau of Manpower Employment and Training showed.
Still, the remittance has not picked up proportionately as workers reportedly send half of their money to the beneficiaries back home using informal channels owing to the better rates of the US dollar offered by hundi operators.
Experts say unofficial channels are attractive to migrant workers since they can send money easily and receive better rates. The exchange rate gap between the formal and informal channels is also to blame.
With a view to encouraging remittance through legal channels, the government hiked the rate of incentives by 0.5 percentage points to 2.5 per cent in January last year.
The government also withdrew the mandatory provisions for the submission of earning documents of the remitters in the case of availing cash incentives against remittances exceeding the amount of $5,000.