Remittance rebound fetches $2.16b in Feb

Remittance rebound fetched US$2.16 billion in February-the highest monthly receipt this fiscal-while Bangladesh strives to buttress its depleting forex reserves with foreign borrowings and import curbs.

Official data showed Sunday the February count of remittances grew by around 40 per cent on a year-on-year basis as the volume of foreign currencies sent by migrant workers in the same month last year amounted to $1.56 billion.

The country last recorded $2.19 billion in remittance inflow in June last year, BB data showed.

With the latest receipt, the country has so far received $15.06 billion in the first eight months of the ongoing financial year (FY'24). The volume was 70 per cent of last fiscal's (FY'23) entire count of $21.60 billion.

Such rising flow in remittance gives some respite to the economy that has been facing multiple strains stemming from various internal and external factors, including forex dearth, in recent months. As a result, the country's stock of foreign currencies (forex) keeps rising.

According to the statistics with Bangladesh Bank (BB), the inflow of remittance was recorded at $1.97 billion in July 2023 that dropped to $1.60 billion in August. But in September last year, the remittance incomes dropped hugely to reach $1.33 billion.

After the deep dive-which economists and analysts party blame on transactions through unauthorized channels for official exchange gaps-the inflow went on an upturn to reach $1.97 billion, $1.93 billion, $1.99 billion and $2.10 billion in October, November, December and January in 2024 respectively.

Seeking anonymity, a BB official said remittance crossing $2.0 billion-mark in February was huge considering the number of official days in the month.

The central banker sees the rise in the remittance inflow as "a kind of indication that the trust of remitters on the economy, after the national elections, started growing once again".

"There is a segment of remitters that used to keep their hard-earned money in hand to get more returns on assuming that the exchange rate would keep rising, but the rate in recent times declined twice and it probably prompted them to release their money back home," he says.

He notes that higher inflow of remittance will definitely encourage the liquidity-strapped commercial banks to use the window of currency swap with the central bank.

According to the BB currency-swapping data, the BB purchased $728 million in deals of just four days (February20, 22, 26 and 27), which pushed up the gross forex reserves under the regulator's calculation method to stand at $25.97 billion. The figure of foreign-exchange reserves in Bangladesh was $20.78 billion in IMF arithmetic at the end of February 2024.

A record number of Bangladeshi migrant workers-over 1.3 million-went abroad for jobs in 2023, up from 1.14 million of the previous year.

This year's February being a leap year had 29 days, which was another reason for the rise in the remittance inflow, according to the BB sources.

Spokesperson for the central bank Md Mezbaul Haque said the BB had already taken various steps like enhancing interest rates on bonds and offshore banking, which are delivering now.

"In the macroeconomic contexts," he says, "the current-account deficit remained surplus while the deficit in financial account keeps falling, which indicates the macroeconomic rebound of the economy."

Managing director and chief executive officer of Mutual Trust Bank (MTB) Syed Mahbubur Rahman feels remitters' trust seems increasing as the economy started stabilising after the recent parliamentary election, which is "a good sign".

He listed various remedial steps taken by the central bank and the commercial banks in recent times to increase the supply of forex, which is basically helping to get more remittance.

"If it continues in the upcoming months, the economy will be able to ease the forex-related pressure to a large extend," the experienced banker predicts.

Former lead economist of World Bank's Dhaka office Dr Zahid Hussain says it is quite clear that banks are basically collecting remittance much higher than that of the BAFEDA-fixed rate, which is helping to increase the flow of forex earning.

It indicates that the flexibility in rates will help raise the flow. So, the policymakers should not be worried too much of allowing market-based rates.

"We should take lesson from it and immediately go for a market-centric rate-fixation mechanism," the eminent economist suggests.

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