Remittance is the lifeline of economic growth of many developing countries. But its growth is set to be subdued for East Asia and South Asia, home to major remittance recipient nations, according to a recent World Bank (WB) report on migration.
As oil prices fall, the Gulf countries, traditionally large sources of outbound remittance flows, are spending less and discouraging recruitment of foreign workers. As result, among the South Asian countries, Bangladesh's performance in remittance income is on the wane. Although a number of steps were taken by its central bank, the flow of remittances dropped substantially by US$2.16 billion in the last fiscal year (FY). The inward remittances fell to US$12.77 billion in the FY 2016-17 from $14.93 billion a year before.
The Middle-Eastern countries are still the main sources of remittances for Bangladesh. The central bank has instructed all scheduled banks to open 'help desk' at each branch for ensuring better remittance services. The BB has also asked the banks to take measures for improving the quality of remittance services so that the Non-Resident Bangladeshis (NRBs) send their hard-earned money home through formal channel.
The ongoing negative growth in remittance inflows might have some adverse effects on domestic demand. This is affecting country's economic growth. From the demand side, strong private-sector-credit growth and capital-machinery-import growth indicate buoyant domestic demand, according to Bangladesh Bank (BB).
For developing countries like Bangladesh, remittance, a key source of external finance, plays a pivotal role in social uplift. Bangladesh is a favourite destination for cheap manpower in global labour market. In fact, worldwide immigration can craft considerable social welfare gains for migrants in both countries from where the workers move and to where they resettle.
Workers' remittance to Bangladesh now constitutes the single largest source of foreign exchange earnings and plays a critical role in the socio-economic development. Remittance has resulted in improved living standards of workers' families and helped in improving the income distribution in favour of poorer and less skilled workers.
The countries of Middle East and Northern Africa have long been the key destinations for these migrant workers. In the recent past, there have been large flows of Bangladeshi migrant workers to Southeast Asia - particularly to Malaysia and Singapore.
The natural resource based economic prosperity of the first group of destination countries since the 1970s has formed a huge demand mainly for unskilled and semi-skilled workers to work in different sectors of those economies.
Similarly, the economic boom of the Southeast Asian countries in the late 1980s and the 1990s has generated demand for unskilled and semi-skilled workers. Bangladesh with a large population and limited economic opportunities has decidedly taken advantage of economic growth and prosperity in those countries.
The flows of migrants leaving the country have not only fulfilled the mandate of the government policy to encourage out-migration as a means of easing unemployment pressure on Bangladesh's ever exploding labour market but also the remittance received from the migrant workers have had significant impact on the economy as a whole.
What is worrying is that if slow growth of remittances continues in the next fiscal, the local currency will have to be devalued. The current account deficit will also increase. The exchange rate of the US dollar crossed Tk 80.5 in May this year, up from the average of Tk 78 during the last several years.
However, many say even if the local currency is depreciated; it will not have a negative impact on the economy immediately as the devaluation will encourage remitters to send money through the proper banking channel.
In the circumstances, a change in policy is thus needed to tap remittance that hinges on more than just sending money for family maintenance, particularly from the Bangladeshi diaspora.
