Focussing on future remittances
Priority to life while combatting the Covid-19 has led to economic losses and it is such a situation when people can hardly predict future sustainability of occupational and economic activities. Accordingly, the world is going to see a decline in the inflow of remittances into various countries. Bangladesh may suffer the most since its economy is largely dependent on remittance earning.
When the apparel export, which accounts for around 84 per cent of total export earnings, was showing negative growth in recent months, remittance was still the hope as it showed a reasonably stable trend. The remittance inflow in July-February period of this fiscal year was 20 per cent higher the amount remitted during the same period in the previous year.
However, in March, the country's remittance inflow sharply declined due to the global coronavirus pandemic and lockdowns imposed by the countries around the world. All indications say remittance inflow will drop further in the upcoming months, leaving an alarming sign for the economy.
Remittance is considered the lifeline of the economy, especially rural Bangladesh. Its share in gross domestic product (GDP) is 12 per cent. Remittance, the second largest sources of foreign exchange earnings after exports, helps cushion the deficit in balance of payments.
Millions of villagers are dependent on remittances, that not only help improve nutrition situation but also induce people to invest at household level as well as in micro and small enterprises.
Bangladesh was the 3rd largest recipient of remittances in South Asia after India and Pakistan in 2018 and ranked 9th among remittance earners in the world. The country received $18.35 billion remittances in 2019 with 18.08 per cent growth, according to Bangladesh Bank data.
Nearly 10 million Bangladeshi migrant workers are now working abroad, especially in countries such as Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman, Bahrain, the USA, the UK, Italy, Malaysia and Singapore.
However, the golden opportunities that Bangladesh has been receiving through remittances have become uncertain due the economic fallout of the Covid-19 pandemic. Remittance inflow has begun to drop and will continue to drop alarmingly in the coming days. Bangladesh Bank data show that in March, remittance inflow stood at $1.29 billion, a 12.84 per cent less fall from the previous month, and the lowest in 15 months.
The remittance inflow into Bangladesh may fall by 22 per cent, and in respect of low and middle income countries it is likely to decline by 19.7 per cent, the World Bank has projected on April 22, in view of the worldwide economic shutdown due to the pandemic. Global remittances are projected to drop by 20 per cent, due to, as the WB report has argued, fall in wages and unemployment of migrant workers.
The trend though alarming for all, is more alarming for Bangladesh because of its dependence on remittances. We should remain clear about the reasons why remittance inflow to Bangladesh will decline significantly in the upcoming days for taking steps required to overcome the situation:
First, a large number of undocumented Bangladeshi migrant workers are earning nothing during the ongoing shutdown; even documented workers are getting either partial wages or foods only.
Second, many Middle Eastern countries have recently deported thousands of migrant workers as they are now prioritising their local labour force.
Third, it is not possible to export new manpower for the next few months whereas the country sent around 60,000 workers abroad a month.
Forth, a significant portion of expatriates have already returned home on leave or owing to the virus and many of them may not go back.
Fifth, the oil price fall due to the virus outbreak will reduce demand for jobs in oil-rich countries where most Bangladeshi migrant workers have long been working.
Although it's unlikely that remittance inflow would bounce back at the moment, the government should take some steps immediately for creating new prospects of remittance earning. As the undocumented workers abroad are now in trouble, the government should discuss with labour receiving countries to find a solution. Special talks should be initiated with the oil-rich economies so that they don't cut jobs of labourers during the current crisis. Once the pandemic is over, new job opportunities may be created in different countries.
The government should also identify vulnerable families and provide financial support to them. There is need to provide financial support to those who already returned home but are not financially well-off. Incentives should also be devised for encouraging the workers to send remittances through formal channels in the coming days.
Md. Tuhin Ahmed is a Research Associate at South Asian Network on Economic Modeling (SANEM).