In spite of various measures taken by the country's 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.
It is, however, a known fact that a significant number of expatriate Bangladeshis are sending their hard-earned money through informal channels. Following severing diplomatic ties with Qatar by four Arab countries, remittance from that nation has become uncertain. Also the uneasy situation in the Middle East also pushed down the flow of inward remittances.
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 concerned for ensuring better remittance services. The central bank 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.
Currently, 29 exchange houses are operating across the globe, setting up 1,155 drawing arrangements abroad, to expedite the remittance inflow. They expect that the flow of inward remittance will improve in the ongoing fiscal year following the different initiatives.
The present negative growth in remittance inflows might have some adverse effects on domestic demand, say analysts. This may possibly 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 the latest quarterly report of the 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 international 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 of Bangladesh. Remittance has resulted in improved living standards of workers' families and helped in improving the income distribution in favor of poorer and less skilled workers.
The countries of Middle East and Northern Africa have 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 - as well.
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.
These 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 so far on the socio-economic development.
Over the years, under the government patronage, the international migration of workers has taken some pressure off from the domestic labour market and has enhanced the economic well-being of the families left behind by the migrants. Intuitively, there are several ways in which remittance inflows may have macro-economic impact on a least developed country like Bangladesh.
For example, if a significant part of the remittance is used for savings and investment, it could lead to higher growth of the economy in the long run. If the remittance-receiving families spend a hefty amount of these transfers on education and health - two important elements of human capital - this may also contribute to long run growth of the economy.
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, up from the average of Tk 78 during the last several years.
Analysts, however, say the figure shown by the Bangladesh Bank (BB) as remittance is only the amount that came through the banking channel. The government should find out the actual remittance figure by tallying the amounts coming through both the formal and informal channels.
The slower remittance growth will put pressure on the exchange rate by depreciating the local currency. But the depreciation, according to analysts, will not have a negative impact on the economy immediately as the devaluation of the local currency will encourage remitters to send money through the proper banking channel.
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.
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