Increasing remittance to keep economy on track

The expatriate workers are apparently showing their trust in and support for the interim government run by its chief Adviser, Dr Muhammad Yunus. If the volume of remittance sent through official banking channels is any indicator, then the expatriate workers have proved this observation by sending a record amount of remittance during the first 10 months of the current fiscal year (2024-25). In fact, with a total remittance of US$24.39 billion between July 2024 and April 2025, the amount has surpassed the total remittance receipts during the previous fiscal at US$23.91 billion by 0.48 billion--- up by 2.0 per cent. The data on remittance have reportedly been supplied by the Bangladesh Bank (BB). If this trend of remittance inflow continues, by the end of the current fiscal, the total remittance could reach US$27 billion or even US$28 billion, according to banking sector projection. With steady supply of remittance, the economy, to all appearances, is looking up as it has been able to meet foreign obligations including debt repayment.

Why remittance inflow is on the rise has no single answer. It has to do with factors like the narrowing gap between official and market-based exchange rate of dollar, clampdown on money laundering and similar other actions taken by the government against manipulators including, for example, the so-called, hundi or hawala operators active in the foreign exchange market. Admittedly, one of most positive impacts of the remittance surge is that Bangladesh's foreign exchange reserve has increased to a comfortable level of US$27.35 billion, according to BB's calculation and US$22 billion by IMF's formula. Obviously, the present outlook for the forex reserve is positive.

A positive impact of increased remittance inflow is that, as reported in this paper, foreign corresponding banks are easing the limits of their line of credit for local banks and the international suppliers of energy or fuels, are also, reportedly lowering their risk premiums. These are no doubt uplifting pieces of news for the economy.  According to monetary analysts, by stabilising the foreign exchange market and strengthening forex reserve, the incoming remittance is also contributing to increasing liquidity flow in the money market. In this connection, an official of Petrobangla is learned to have told this newspaper that the higher remittance flow has helped the state-owned company to clear external debts amounting to US$3.74 billion ahead of schedule. Naturally, the energy suppliers are now asking for lower premium on the spot market. This would definitely go to reduce import cost of, for instance, Liquefied Natural Gas (LNG).

Evidently, the upturn in remittance inflow helps normalise import, which economists believe facilitates fight inflation. But remittance alone is not going to cure all the ills afflicting the economy. For instance, would the increasing remittance receipts be enough to answer the chronic shortage of gas supply that has almost crippled the textiles and garments sectors that constitute 85 per cent of the country's export? Since running industries with imported energy is not a feasible proposition for an energy-starved economy like Bangladesh, the solution obviously lies in developing domestic gas reserves. According to Petrobangla, of the total 4.26 billion cubic feet of gas demand in the country, only 831 million cubic feet come from imported LNG. So, the energy supply crunch is going to stay. Admittedly, this is another reason for a lack of industrial investment. Since ensured supply of energy is a precondition for local and overseas companies, especially foreign direct investment (FDI) to come, the interim government needs also to turn its full attention to the industry sector, which is but the backbone of the economy.