Remittance: lifeblood of pandemic hit economy
Despite the crisis of the deadly corona virus, remittance inflow to the country has continued to record and revitalize the economy. When COVID-19 infections began worldwide, in the first three months of 2020, remittance inflow to the country slowed and many feared it would continue. But since then, the flow of remittances has been increasing, putting an end to all speculations.
While expatriates sent US$ 18.20 billion as remittances in the 2019-20 fiscal year, they sent remittances of US$ 20.67 billion in the first 10 months of the fiscal year 2020-21 till April, which is the highest remittance inflow in the history of Bangladesh. The COVID-19 effect has set two important records for Bangladesh's economy despite the ongoing stagnation in the world economy. As of May 3, 2021, foreign exchange reserves had surpassed the record US$ 45.10 billion and stood at US$ 44.95 billion at the end of April, 2021.
In contrast, due to strong foreign exchange reserves, Bangladesh Bank has made a significant policy decision to lend US$ 200 million to 250 million to the Sri Lankan government at 2% interest through swaps, and this has certainly brightened Bangladesh's image home and abroad. In contrast to the decline in imports, the rise in remittances, the decline in the flow of illegal hundi and the turnaround in the export sector have been cited by the Central Bank as the reason for the increase in reserves.
Basically, the hard earned money people from abroad send to their home country back is called remittance. Remittance is the lifeblood of the national economy, the foundation of development, the golden ladder of dreams and in fact one of the driving forces of the economy.
For a developing nation like Bangladesh, remittance is one of the main sources of foreign exchange. Its role and significance outweigh the development assistance received from various countries and organizations, and much more stable than the flow of private credit and portfolio equity. Contribution of remittances to economic development is 12 percent of the total GDP and Bangladesh ranks seventh in the world. The amount of foreign currency these expatriate workers are sending to the country is half of the total export income of the country.
In the last forty years, about 12.5 million expatriates have gone abroad and this number is constantly increasing. They are building this country directly and indirectly by regularly sending their hard earned money. While expatriates sent remittances worth US$ 18.20 billion to the country in the 2019-20 fiscal year, they also sent US$ 20.67 billion in the first 10 months of the 2020-21 fiscal year till April, which is the highest remittance inflow in the history of Bangladesh.
After readymade garments, the contribution of remittances is playing a major role in keeping the country's economy afloat. Due to expatriates, Bangladesh Bank now has a record amount of reserves, amounting to US$ 45.10 billion at the end of May 3, 2021. This contribution is so strong and important that it can cover nine months of import costs. Banks have been able to overcome the liquidity crisis due to remittances. The remittance money has rejuvenated small entrepreneurs which has helped the economy stand in a good stead.
According to the Central Bank, remittances sent by expatriates set new records of US$ 2.59 billion in July 2020, US$ 2.15 billion in September and US$ 2.10 billion in October. According to the same data, the growth of remittances in the same months of 2020 compared to July, August and September 2019 has increased by about 63, 36 and 46 percent respectively. Not only that, before Eid-ul-Fitr, the expatriates sent remittances of US$ 2.07 million in April 2021 and US$ 684.4 million in just five days from May 2 to 6, which is unprecedented and a success for the economy.
Never before in the history of Bangladesh has the reserve exceeded US$ 45.10 billion and not as much remittance came in a month as in last July 2020. On the other hand, in order to increase remittances like the previous fiscal year of 2019-20, incentives at the rate of 2 percent will continue in the current fiscal year 2020-21, said the Finance Minister, "The government is working to ensure the overall welfare and equality of expatriates, create new labour markets through diplomatic efforts and create skilled manpower through training to meet the needs of those markets."
A portion of the money earned by the expatriates is sent to the family through banks. This money not only meets the needs of their families, but also contributes to the economic development of the country by increasing their standard of living, infrastructure development, saving and investing in various fields. Remittances serve as an important nucleus in our economic dynamics. This remittance is one of the driving forces of the national economy. At the same time, remittances are playing an important role in solving the unemployment problem of the country.
Moreover, due to the export of manpower, the daily needs and food items of a large number of people are not being procured locally. There are around one and a half crore Bangladeshis scattered in more than 150 countries all over the world, who are playing a positive role in our economy as a whole. According to the Bureau of Manpower, Employment and Training (BMET), 85,222 people went abroad between January and February 2021. On the other hand, 2, 17, 669 Bangladeshis went abroad in 2020 against 7,00,159 in 2019.
Due to the prevention of illegal hundi, the inflow of remittances through legal channels has increased significantly. Legal remittance inflows have increased more than any time before. Expatriates are much more aware now and they are interested in sending remittances legally, avoiding illegal routes. The government and Bangladesh Bank have taken various steps to prevent hundi to further increase remittance income but it could not be stopped completely. However, the 2 percent cash incentive introduced in the last financial year is playing a major role in preventing hundi.
Manpower export sector is slowly becoming a major factor in the overall socio-economic development of Bangladesh. But the potential of this sector is not yet being fully utilized. Many are investing in unproductive sectors like buying land and flats.
The writer is a banker and freelance