Rising remittance provides a breather amid forex crisis

Remittance inflow has continued to rise for the past few months, providing a breather for a country facing multiple challenges, including external payment pressures amid dwindling foreign exchange reserves.

In October, remittances sent home by Bangladesh's migrant workers rose 21.31 percent year-on-year to $2.39 billion following a 40 percent jump in August and 80 percent jump in September, central bank data showed.

During July to October of fiscal year 2024-25, remittance inflow stood at $8.93 billion, up 30 percent from $6.87 billion in the corresponding period of FY24, central bank data showed.

Mirza Elias Uddin Ahmed, managing director of Jamuna Bank, said the uptick in remittance inflow would reduce the pressure on the country's foreign exchange reserves.

He hoped remittance inflow would increase further in the coming days since Bangladeshi expatriates' capacity to send money has increased due to falling commodity prices on the global market.

"The current account balance has already turned positive and we hope that the financial account will also be in the positive territory in the coming months," Ahmed said.

However, on condition of anonymity, a senior central bank official attributed the sharp increase in remittance inflow to volatility in the forex market in the corresponding months of the previous year, which had led to lower remittances coming through formal channels.

"There was a huge gap in the exchange rate between formal and informal channels last year, which prompted migrants to send money through informal channels," he added.

From October 1 to 26, Islami Bank Bangladesh received the highest amount of remittance at $371 million, followed by Agrani Bank at $185 million, Sonali Bank at $143 million, and BRAC Bank at $122 million, central bank data showed.

Since April this year, Bangladeshi expatriates have sent home more than $2 billion in each month except July. Remittance inflow slumped that month as the Sheikh Hasina-led Awami League government imposed internet blackouts to quell protests surrounding the quota for government jobs.

Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development, told The Daily Star that remittance inflow continuing to rise was good news.

However, he said the forex earnings were not enough considering the country's foreign payment obligations, adding that remittance inflow and export earnings will have to increase further to mitigate the ongoing pressure on foreign exchange reserves.

In the July to August period of this fiscal year, exports grew only 2.5 percent year-on-year.

Mujeri, also a former chief economist of the Bangladesh Bank, said that Adani Power has already warned Bangladesh of a complete suspension of supply if overdue payments of around $850 million are not cleared.

The economist recommended the government export skilled manpower to increase remittance earnings.

He also said authorities should find new markets and take initiatives to tackle hundi, an illegal and informal remittance instrument.

During January to September of this year, the number of workers who went abroad stood at 698,558, down from 989,685 in the same period of the previous year, data from the Bureau of Manpower Employment and Training showed.

In FY24, remittance inflow stood at $23.91 billion, up from $21.61 billion the year prior, BB data showed.

The country's foreign exchange reserves stood at $19.87 billion (BPM6) till October 30 of this year, down from $20.70 billion (BPM6) at the same time last year, BB data showed.

Bangladesh's foreign exchange reserves have been falling since surging to a record high of $48 billion in August 2021.

Besides, external factors such as the slowdown of the global economy, mismanagement in the Bangladesh's forex market, frequent policy changes by the central bank and the gap between the official and unofficial exchange rate are also to blame for the crisis.

Since 2021, the central bank has pumped around $27 billion to the market from its reserves.