Remittances up 48% in Oct after fall for three straight months

Bangladesh received $1.98 billion in inward remittances in October, the highest in four months, as the dollar strengthened and the government offered incentives to boost remittances.

Central bank data show that expatriates sent $643 million more remittances in October than in September, a 48.2% increase. Remittance inflow hit a 41-month low at $1.33 billion in September.

The country received $1.59 billion in remittances in October last year.

A senior central bank official told The Business Standard that expatriates send remittances through channels with higher exchange rates. As a result, remittances through the banking channel decreased over the past few months as expatriates got better rates in the hundi market. 

However, remittance inflow started to rise after the government increased the incentive from 2.5% to 5% on 22 October, he said.

A private bank official told The Business Standard that some banks' treasury departments were fined for overpricing the dollar. However, the central bank verbally asked some banks to offer higher remittance rates to boost inflows, which led to an increase in remittances.

Bangladesh received $6.88 billion in remittances in the first four months (July-October) of the current financial year 2023-24, down 4.36% from the same period of the last fiscal year.

The official buying and selling rates for remittance and export proceeds were increased to Tk110.50 and Tk111, respectively, on Tuesday, up from Tk110 and Tk110.50, respectively. The decisions were finalised at a meeting between the Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers' Association (Bafeda), said managing directors of two private banks.

According to central bank data, $154 million in remittances came through state-owned banks in October and $1.75 billion through private banks.

Dr Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem), said incentives would temporarily increase remittance inflow but it is not a long-term solution.

"If we want to increase remittances, we need to stop hundi, and if we want to stop hundi, we need to stop money laundering. A lot of money is being smuggled abroad, and we need to control it by any means," he said, adding that hundi operators will always offer better rates than banks.

The dollar crisis in Bangladesh became evident in March 2022, with the outbreak of the Russia-Ukraine war. To address the crisis, the Bangladesh Bank initially fixed the dollar price, which exacerbated the situation.

Central bank data show that the country's forex reserves stood at $20.50 billion on 31 October. However, reserves will slip to $19.29 billion after the clearing of the import bills of $1.21 billion for the September-October period with the Asian Clearing Union (ACU) next week.

Bangladesh's foreign exchange reserves stood at $35.80 billion on 25 October 2022