Remittance drops by 11pc in Sep03 October 2022
Staff Reporter :
The inflow of remittances has dropped by 11 per cent year-on-year to $1.54 billion in September making it lowest in seven months.
The inflow in last month also fell by 24.4 per cent from the previous month (August) when the expatriates sent $2.04 billion.
The decline in remittance inflow is likely to intensify pressure on foreign currency reserve as the country is struggling to manage its macroeconomic stability caused by the higher inflation and US dollar shortages.
"The decrease in remittances has already put an adverse impact on the foreign exchange reserves, which stood at $36.44 billion on September 28, down 6.7 per cent from August 31," said an official of the Bangladesh Bank.
Remittances, however, increased five per cent year-on-year to $5.67 billion in the first quarter of the current fiscal year.
If the declining trend of remittances continues in the days ahead, the ongoing volatility in the foreign exchange market will deepen, the BB official added.
With September's remittance inflow, the total remittance in the first three months of the 2022-23 fiscal year stood at $5.67 billion, which was $5.41 billion during the same period last year. The expatriates have sent remittances of more than two billion dollars through legal channels for two consecutive months of the current fiscal year. In August, $2.03 billion in remittances came through the banking channel and in July, it was $2.09 billion.
The central bank should motivate banks to mobilise more remittances with a view to easing the ongoing stress on the foreign exchange market, experts opined.
The local currency faced a major depreciation in recent months due to the shortage of the US dollar amid falling reserves.
The exchange rate stood at Tk 107.5 per dollar on September 29, down 25.7 per cent year-on-year, data from the BB showed.
Meanwhile, the experts have indentified two reasons- increase in living cost for cost expatriates and high dollar price in open market-for down trend of inflow of remittance.
"The cost of living for expatriates increased due to global inflation. Additionally, they are preferring hundi over legal remittance channels as they are getting Tk5-6 per dollar more than the bank exchange rate," said Dr Ahsan H Mansur, Executive Director of Policy Research Institute (PRI).
Bankers had initially feared that remittances may decrease due to fixing the exchange rate and had expressed concern that the Hundi channel may become more active.
"Efforts should be made to get increased remittances from new markets. Now that the Malaysian market has opened up a bit, South Korea is also showing interest. We should try to send more skilled workers there," Mansur said.
Currently, remittance through Hundi yields Tk113-114 per dollar. Due to fixed exchange rate at banks, the difference between dollar price of Hundi and the banking channel is at least Tk6-7.