Remittance growth slows further in January

The flow of remittance has been slowing down for four straight months to below $2 billion in January.

The surge in remittance seen at the beginning of this fiscal year in July has fallen to one-third this month. The remittance growth was 62% year-on-year in July, which came down to 20% in January, according to data released by the Bangladesh Bank on Monday.

The data shows that Bangladesh received $1.96 billion in January, which is $88 million less than the remittance sent in the previous month.

However, the overall remittance inflow in the seven months of the fiscal year jumped up by 35% from the same period a year earlier.

Economist Zahid Hussain told The Business Standard that remittance inflow had gone up since money stopped coming from abroad through illegal channels. Moreover, 2% cash incentives given by the government encourages migrants to send money home through formal channels.

Due to the lingering pandemic, migrants have also sent home big chunks of their saved-up cash. Besides, the demand for remittance has been high due to income loss of families, inflicted by flood and Covid-19.

Now as the impacts are losing intensity, the growth in remittance inflow has dropped and it will fall further in the days to come, Zahid said.

He also thinks remittance through illegal channels will climb up again as the situation goes back to normal.

The growth in remittance has had direct influence on the foreign currency reserves that again approaches $43 billion. The reserves fell down to $42.17 billion on January 7.

The central bank is keeping the dollar-taka exchange rate stable by purchasing dollars from the market, following the boost in the foreign currency reserves. That led to an increase in money flow and additional liquidity in the banking sector, the economist said, adding that the additional money flow can fuel inflation.

The central bank, however, thinks inflation will not increase much because of income loss during the pandemic.