Economy
Decline in Remittances Worries Bangladesh Amid Focus on Forex Reserves
Remittance inflows, a crucial source of USD earnings for Bangladesh, have reached a concerning low, marking the lowest level in three and a half years. This decline comes at a time when Bangladesh is actively seeking to bolster its foreign exchange reserves. According to data released by Bangladesh Bank on a Sunday, remittance inflows stood at $1.34 billion in September 2023, the lowest figure since March 2020 when it was $1.27 billion. Compared to the same month last year, remittances decreased by 12.72 percent or $200 million.
During the first quarter of the fiscal year 2024 (July-September), Bangladesh received $4.91 billion in remittances. This was compared to $4.52 billion during the same period in fiscal year 2020. The decline in remittances has raised concerns among economists and bankers, with hundi, an illegal cross-border money transaction channel, cited as a major reason.
Remitters are drawn to hundi due to its offering of higher exchange rates in comparison to the official channel. Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank, emphasized the need for the central bank to take action against hundi to reverse the declining trend in remittance inflows through official banking channels.
Zahid Hussain, a former lead economist at the World Bank’s Dhaka Office, pointed out that the primary reason for the drop in remittances is the exchange rate disparity between the banking channel and the kerb market. Remitters receive Tk 112.75 per USD, including an incentive, through the banking channel, while in the kerb market, they get Tk 117 to Tk 118, resulting in a difference of nearly Tk 5 to Tk 6.
An anonymous senior bank manager and director revealed that some businessmen are encouraging remitters to use hundi, possibly due to the uncertainty surrounding the upcoming national polls. Zahid Hussain also noted that the number of Bangladeshi remitters has not decreased, and the countries where they predominantly work are not experiencing economic turmoil.
Despite the declining remittance inflow, Bangladesh has witnessed a substantial increase in the number of overseas workers. In 2022, after the easing of pandemic restrictions, Bangladesh exported a record 11.35 lakh manpower, the highest in its history. In the first eight months of 2023, this figure stood at 8.82 lakh, surpassing the 2021 yearly figure of 6.17 lakh.
The impact of this decline in remittances is being felt on Bangladesh’s foreign exchange reserves, which have been steadily decreasing. In September, reserves dwindled to $21.14 billion, compared to $36.5 billion in the same month the previous year. The devaluation of the Taka against the USD continues due to declining reserves, with the interbank exchange rate recently increased to Tk 110.5.
While the government’s austerity measures curbed imports of luxury goods, leading to an overall decline in import payments in July, the cost of essential goods imports has risen significantly due to USD price hikes. This situation has prevented Bangladesh from benefiting from the drop in global goods prices.
Expatriate Bangladeshis sent approximately US$ 2.11 billion in remittances during the first 28 days of September in the fiscal year 2024-25, according to data released by Bangladesh Bank on 29 September.
Of this total, state-owned and specialised banks handled $679.10 million, while private banks received $1.43 billion in remittances.
Chief Adviser to Bangladesh’s interim government, Professor Muhammad Yunus, has vowed to expedite reforms and hold elections swiftly. Yunus, who recently assumed the role after the collapse of Prime Minister Sheikh Hasina’s 15-year administration, expressed his commitment during an interview with Tokyo-based news outlet NHK WORLD in New York on Sunday. He was attending the United Nations General Assembly at the time.
Following mass student-led protests that ended Hasina’s long-standing rule in August, Yunus stepped in as the leader of the caretaker government. Known for founding Grameen Bank, an institution providing microloans to the underprivileged, Yunus, along with the bank, earned the Nobel Peace Prize in 2006 for his efforts in poverty alleviation.
During the interview, Yunus emphasized that the interim government’s primary mission is to implement reforms promptly and ensure elections are held as soon as the groundwork is complete. He underscored the importance of success, stating, “Failure is not something that we can accept.”
Addressing the pivotal role of students in the ousting of the Hasina administration, Yunus acknowledged the sacrifices made by young people, referring to their involvement as part of a “revolution.” He highlighted his intention to engage the younger generation in shaping policy.
Furthermore, Yunus called for continued support from Japan, Bangladesh’s largest donor, during this crucial transition period. He stressed that Japan’s assistance is vital to stabilizing Bangladesh’s economy and fostering a democratic foundation in the nation.
Syeda Rizwana Hasan, the Adviser for Environment, Forests, and Climate Change, announced today that steps will be taken to restrict the use of polythene shopping bags to safeguard future generations.
Starting from October 1, polythene bags will be banned in shopping malls, followed by a ban in kitchen markets from November 1.
“Everyone must take responsibility and stop using polythene voluntarily. Action against polythene producers will begin from November 1,” Rizwana Hasan stated during a seminar.
The Department of Environment (DoE) organized the seminar to raise public awareness about alternatives to banned polythene bags.
Rizwana Hasan highlighted that the restriction on polythene will be executed in phases according to legal provisions, and discussions with shopping centers and store owners are ongoing to ensure a smooth transition.
She also announced plans to make the government secretariat a plastic-free zone by December.
Other speakers at the seminar included Environment Secretary Dr. Farhina Ahmed, DoE Director General Dr. Abdul Hamid, Director Rajinara Begum, President of the Shop Owners Association Muhammad Helal Uddin, and Md. Arifur Rahman Bhuiyan, Assistant Professor of Environmental Science at BUP. They discussed the harmful effects of polythene and the need for alternative products.
Earlier, Rizwana Hasan inaugurated a fair showcasing eco-friendly alternatives to polythene bags and visited 24 stalls. The fair featured products from government and private entrepreneurs, including reusable bags, jute bags, paper bags, and items made from bamboo and cane.
