Remittances jumped 39% in August

Remittances sent by Bangladeshis living abroad soared nearly 39 percent year-on-year to $2.2 billion in August, which is likely to ease pressure on the foreign exchange reserves to some extent.

"It obviously comes as a sigh of relief for the economy. As this additional remittance will increase our existing reserves, it will intensify money circulation in the economy, and thus increase investments," said Monzur Hossain, research director at the Bangladesh Institute of Development Studies.

August's receipts were 16.10 percent higher than those recorded in July, when remittances hit a 10-month low of $1.90 billion.

The slump in July occurred because expatriates were unable to send funds in the middle of the month as the government imposed an internet blackout to quell protests centring the quota system in government jobs that ultimately forced the previous government to quit and led to the formation of an interim government.

The slump in July occurred because expatriates were unable to send funds in the middle of the month as the government imposed an internet blackout to quell protests centring the quota system in government jobs

Broadband internet was suspended for five consecutive days and mobile internet was off for 10 days. Apart from that, banks were also shuttered from July 19 to July 23

As a result, foreign transactions with the country's banks virtually ground to a halt.

At the same time, some remittance earners launched a campaign to express solidarity with the student-led protests by refraining from sending money to the country.

Hossain said the jump in remittances indicated that expatriates were eager to be a part of the development of a "new Bangladesh".

"Expatriates have sent more remittances in part due to their confidence in the new government and in its slogan of building a new country," he said.

He added that increasing remittance receipts would have a positive impact on the current account.

In order to sustain the growth of remittance flow, Hussain said it is important for the interim government to give positive indications of their commitment to rebuilding the country.

"If the current government fails to do that, remittance flow may decrease again," he added.

Owing to low remittance inflow and high import bills, Bangladesh's foreign exchange reserves have been declining for the last couple of years.

The forex crisis intensified in mid-2022 due to the price hike of essential goods and commodities in the global market because of supply chain disruptions caused by the lingering impacts of the Covid-19 pandemic and outbreak of the Russia-Ukraine war.

Bangladesh's foreign exchange reserves soared to a historic high of $48 billion in August 2021.

However, after the start of the Russia-Ukraine war, import costs increased sharply. At the same time, due to insufficient growth in remittances and exports, reserves began to decrease rapidly.

The central bank has taken various steps to encourage remittance earners and these measures have had a positive impact.

On May 8, the Bangladesh Bank withdrew the fixed exchange rate mechanism and introduced the crawling peg system for spot purchases and sales of US dollars.

The same day, the central bank increased the price of each US dollar to Tk 117 from Tk 112.

Such moves encouraged expatriates to send more remittances through formal channels, according to exporters and banks.

Central bank data showed that remittance inflow, a key source of foreign currency, grew 10 percent year-on-year to $23.9 billion in FY24.