A UNB report released on Tuesday, April 12 last says that homeward remittance flow from the US and other Western destinations has, of late, been showing a robust trend. This is reassuring seeing that the remittance from the traditional Middle Eastern sources over the past few months since August, 2021 has been on a falling curve. Bangladesh Bank (BB)'s report shows that on August 25 last year, the reserve was at its peak at US$48 billion. But last month (on March 7), the amount dropped to US$43.9 billion after payment of import bill worth US$2.16 billion to the Asian Clearing Union (ACU). However, the reserve position has slightly improved this month (April) at US$44.30 billion following an increase in inward remittance.
Even so, with this amount of reserve dollars, the country can meet only five months' import costs, which is no doubt a safe position. But when compared to the forex reserve position in the past, it is rather low. Even so, the fall in the foreign currency reserve should not in itself be worrying, for it has to be used anyway to meet various liabilities including payment of import bills. With the resumption of the economic activities, especially, the external trade, the pressure on the country's foreign exchange reserve has obviously increased. This has been a cause for concern for some experts particularly in the wake of the collapse of the Sri Lankan economy. Admittedly, one of the many factors that led to that country's misery is of course its acute current account deficit. At the same time, the foreign currency reserve of Sri Lanka has dipped alarmingly forcing the incumbent government of that country to seek direct foreign aid to bail its economy out.
However, being dependent mainly on tourism, Sri Lanka's economy was badly hurt by the pandemic. Moreover, ill-conceived mega-projects apart, its agriculture has been severely jolted due to a wrong policy of going organic. As a consequence, millions of farmers have gone broke. Food grains have become scarce due to crop failure. With nearly depleted foreign currency reserve, the nation cannot buy energy and essential commodities. It is indeed pathetic for a very promising middle-Income country of South Asia! But it is a purely manmade calamity that could be averted had the country's economy been managed judiciously.
Bangladesh's economy, compared to that of Sri Lanka, is standing on a firmer footing. True, the pandemic did a lot of harm to the economy and the people's livelihood. But after a short-lived initial setback the economy began to look up. All the major sectors of the economy including agriculture, RMG export and, especially, remittance inflow did better than expected even under the gruelling pandemic-induced conditions. That means Bangladesh economy has already passed one of its most difficult tests in history. Now, the economy is faced with post-pandemic challenges including the volatile global energy, commodity and food grains market. Such market instability was not unexpected. The post-pandemic economic resurgence globally has driven up energy price. The world economy is moving fast to recover the losses suffered during the two years of the pandemic. As a result, it is heating up. The Ukraine war has only made matters worse. As a fallout from these developments globally, the cost of imports has, of late, begun to increase by leaps and bounds. But the foreign currency reserve of the country has not been increasing at the same rate as that of the rising volumes and costs of the import.
The foreign currency earnings from exports, which has been burgeoning after the pandemic, will, hopefully, allay some fears related to fall in the volume of remittance from the Middle-East. Even so, the government needs to get to the root of why the remittance from the Middle East including Saudi Arabia where the largest number of Bangladesh's migrant workers are employed has been falling. One wonders why it should be so when even during the most difficult months during the pandemic,the inward remittance surged beating all the prognostications of doomsayers. Some are of the view that the overseas migrant workers are avoiding official channels to send their remittance money home. It is thought that many are sending their earnings home through private money exchanges or using other informal ones including hundi. Some might even be carrying their foreign earnings by hand when returning home.
As a result, the government, it is said, is being deprived of these dollars. Taka's exchange rate against US$ in the open market being higher than that of the official rate may be one reason why the migrant workers might be using the unofficial money transfer routes. In the circumstances, the government can address this problem by way of providing the remitters with incentives of various forms. But if the drop in the volume of remittance is due to fewer people sending their earnings home, the matter would warrant investigation. If fewer people are joining overseas jobs or if the majority of those coming back are not returning to their jobs abroad, it is concerning. As foreign remittance by expatriate workers is crucial to keep the wheel of the economy turning, it is time the government adopted short-, medium- and long-term strategies to develop this vital sector of the economy. The government should concentrate on exporting qualified manpower abroad. This would improve Bangladesh's image in the countries hosting those expatriate employees as well as help earn higher volumes of foreign currency for the country.