Remittance inflow during Eid-ul-Azha
The remittance is the lifeblood of our national economy. Remittance has become an important aspect for the developing countries like Bangladesh for socio-economic advancement. It is the second-highest source of foreign currency earning for Bangladesh; the first being ready-made garments industry. However, in terms of net earnings, remittance can be considered the highest since a large portion of RMG earnings need to be spent on raw materials.
An encouraging report was recently released by the Bangladesh Bank (BB) that the flow of remittances during Eid-ul-Azha (10 days of August) was US$1.75 billion, the highest ever remittance inflow in a single month and the 2019-20 financial year started with the remittance inflow in an upturn mood as the country received $1.6 billion in July, the second highest for a month. It was 21.2% more than the amount in same month in the last year.
The expatriates set the highest monthly record of remittance in May 2019 by sending over $1.75 billion ahead of the Eid-ul-Fitr. With the newly buoyant remittance inflow, the foreign currency reserves of Bangladesh reached $32.4 billion on August 14, 2019 and the reserves slightly dropped below $32 billion recently after payments for import to the Asian Clearing Union.
However, it was $16.42 billion in the just-concluded fiscal year (FY) 2019 as the exchange rate of local currency weakened against the US dollar which jumped down from $14.98 billion in FY 2017-18. The central report also stated that strengthening supervision and monitoring by the central bank to check illegal 'hundi' transaction had contributed to the increased flow of remittances.
Bangladesh received $12.77 billion remittance in FY '17 and $14.93 billion in FY '16. The BB expects that the upward trend in inward remittance will continue in the current fiscal year as the government has announced 2.0% incentive for remittance receipts.
The government has already allocated Tk. 30.60 billion as subsidy in the budget for this fiscal year to encourage expatriate workers to send their money through legal channels and definitely it will boost up the remittance inflow in the coming days.
It is true that most of the banks are now trying their level best to increase the flow of inward remittances from different parts of the world through establishing drawing arrangements with overseas companies and these banks are trying desperately to increase the flow of inward remittances to meet their own import payment. Agent banking outlets of various banks have also given a momentum to receive the remittance inflow positively in the distance remote areas.
Remittances mainly came from Middle Eastern countries such as the United Arab Emirates, Saudi Arabia, Kuwait, USA, Malaysia, Singapore and others European countries. The remitters who stay in abroad are devoted and work hard to earn foreign currency and the government is encouraging them to send more and more remittance through formal channels. But it is a matter of regret that the foreign missions are not sincere enough to the remitters abroad. When they come back to Bangladesh, they explain their bitter experience.
In Bangladesh, remittance is one of the most important economic variables in recent times as it has an impact on economic growth, it helps in promoting balance of payments, increasing foreign exchange reserves, enhancing national savings and increasing velocity of money. For about two decades remittance has been contributing around 35% of export earnings. Moreover, it is greater than foreign aid and thus helps in lessening dependence on foreign aid. If cost of imported raw materials is deducted from the foreign currency earning of the garments sector, then remittance becomes the largest sector of foreign currency earnings.
Remittance inflow is increasing day by day but at a lower rate than the increase in emigration from Bangladesh due to the increasing share of unskilled or semi-skilled labours than the professionals in international migration. The share of remittance in GNI (Gross National Income) is increasing day by day. Remittance creates a positive impact on almost all the macro-economic indicators of a country. It also has a great contribution in Gross Domestic Product (GDP) of the country and the contribution of remittance inflow of our GDP (near about 12%) is increasing significantly. The remittance is also being used for many purposes of nation-building.
We have millions of expatriate workers and if they can remit their hard-earned money through formal channels, then the economy will be greatly benefitted in future. Developing the skills of migrant workers should also be one of our main goals because right now, most workers sent abroad from Bangladesh are largely unskilled and untrained.
One way is to help migrant workers and prospective migrant workers access information. It will make the whole process easier, safer and free of harassment from unscrupulous middlemen. The migrant portal would be a commendable initiative.
Many reasons are responsible for upward remittance inflow like exchange house rate, various measures to curb informal system hundi, workers' job status, and economic conditions of employing countries etc. Our government should monitor the causes of remittance inflow regularly and should take pragmatic steps to continue the buoyant remittance inflow in the coming days.
The writer is a Banker