Bangladesh is on track to cross the $30 billion remittance mark by the end of fiscal year 2024-25, driven by record inflows that have already reached $23.75 billion by April 21. This surge in overseas income is easing pressure on banks, strengthening foreign exchange reserves, and making it easier to open Letters of Credit (LCs).
Compared to $19.12 billion during the same period of FY24, this nearly 24 per cent rise has injected much-needed confidence across the banking sector. Banks that struggled to open LCs just months ago are now clearing import-related transactions more smoothly. This marks a turnaround in a sector previously hampered by tight dollar availability.
The remittance boom directly pushed up gross reserves to $26.7 billion as of early April. On a BPM6 basis, usable reserves hit $21.34 billion. This increase gives Bangladesh Bank more breathing space to stabilize the exchange rate, manage macroeconomic volatility, and support the taka's value against the dollar.
A visible impact is the drastic drop in overdue LC payments-from $445 million at the end of November 2024 to just $105 million by February 2025. That's a 76 per cent decline in only three months. Foreign corresponding banks, noticing this improvement, have also relaxed restrictions on clearing LCs, restoring much-needed confidence in Bangladesh's trade finance mechanisms.
A top central bank official, requesting anonymity, said remittance is now "the single biggest stabilizer" of the financial system, enabling timely payments, helping exporters, and calming importers.
Current account dynamics are also shifting. The July-February current account deficit narrowed sharply to $1.27 billion from $4.07 billion a year earlier. Analysts say this indicates a healthier external balance supported by remittance inflows, modest import growth, and some recovery in export earnings.
According to a senior Bangladesh Bank official, "Crossing the $30 billion threshold will not only stabilize the reserve base but also strengthen investor confidence. Banks are no longer in panic mode, and that's because remittance support has become consistent, dependable."
Policy moves have helped. The government's 2.5 per cent cash incentive on official remittance channels, alongside flexible exchange rate management, has closed the gap between formal and 'hundi' rates. Migrant workers increasingly prefer banking channels, reversing past trends of informal transfers.
Zahid Hussain, former lead economist at the World Bank's Dhaka office, commented, "What's changed is credibility-both at home and abroad. Remittance via banking channels surged because incentives are finally working, and the rate gap isn't worth the risk of hundi anymore."
Behind the numbers lies a behavioral shift. Migrants, reassured by stable policies and better exchange rates, are sending more money through official routes. Banks, equipped with improved dollar holdings, are clearing delayed imports and servicing debt without delays. Exporters, too, are benefiting from smoother trade financing.
With the final quarter of FY25 underway, the outlook appears solid. A continuation of the current pace means remittances may hit or slightly exceed $30 billion-a record high for Bangladesh.
The broader economic message is clear: remittances are no longer just a support-they're now driving recovery.
