Remittance lowest in eight months

Remittances to Bangladesh declined more than 7% year-on-year to $1.52 billion in October, according to the central bank's data, which is the lowest in eight months despite a surge in outbound migrant workers.

Bankers say the uniform exchange rate fixed by banks for remittances and informal money transaction channels such as "Hundi" have had a negative effect on the inflow of the easy source of US dollars for the country.

In September, the country received $1.54 billion in remittances – 11% down from the same month a year earlier. In the second week of September, the uniform dollar rate for remittances was enforced.

In July and August, the remittance outlook was bright as money transacted home by Bangladeshi nationals staying abroad was more than $4 billion in those months.

"The fall looks worrying," said the managing director of a private bank while talking to The Business Standard on condition of anonymity. "Look at the surge in outbound workers, while the money flow is dipping."

Official data shows around 10 lakh people left home for foreign countries in FY22.

Pointing the finger at Hundi, the banker said the formal banking channel offers Tk107 plus 2.5% cash incentive [per dollar], while the informal market rate is Tk115 to Tk120. "Hundi is clearly winning here."

In early September, the Association of Bankers Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers Association (Befeda) moved for an uniform dollar rate for remittances and export bills to stabilise the forex market.

Subsequently, dollar rates were fixed at Tk108 for remittances and Tk99 for encashing export bills. However, the rates were later adjusted to Tk107 and Tk99.50 later.

After implementation, the move affected remittance inflow in the very first September, show data.

"There is no question about the genuineness of the move, but it failed eventually. It was a wrong experiment," an ABB official told The Business Standard, adding remittances might face further bumps in upcoming days if the central bank continues toying with more similar moves.

In a meeting with the ABB and Bafeda Monday, the Bangladesh Bank recommended banks opening more exchange houses abroad and reducing money transaction fees.

"Local banks collect only 10% of their remittances through their own channels as the remaining comes from money transfer services such as MoneyGram and Western Union. The services will not reduce the fees even if we cut our charges," an official who attended the meeting told TBS.

"Besides, banks told the central banks that opening a new shop will cost dollars worth at least Tk10 crore. Then the central bank walked back on the recommendation," he added.

According to the central bank data, remittances through banking channels totalled $21.03 billion in FY22 – 15% less than the previous year.

The government took several steps to boost the remittance inflow in FY22. One of those was no requirement of showing any document to send money home.

Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD), blamed different dollar rates, which he said are encouraging Bangladeshis abroad to send money through hundi.

He said under-invoicing must be stopped to boost remittance inflow.