Remittance has been one of the key contributors to foreign exchange reserve in the country. Remittances have depicted a familiar trend where the numbers continued to climb year after year. According to Bangladesh Bank data, total remittance was US$1.88 billion in FY01; it increased approximately 8 times to US$14.46 billion in FY13 - implying that remittances have leapt at an average annual growth rate of 18.5 percent in 12 years. Will FY14 be able to maintain the glory or is this all about to change? Let us take a quick look.
In the first half of FY14 (July to December 2013), total remittance was US$ 6.78 billion. This was 8.4 percent lower than remittances in the same period in FY13. This is an unpleasant change as growths in remittances in the first half of fiscal years have always been positive in recent history.
The most common explanation for a decline in remittance remains that the total number of migrants going abroad is not growing like preceding years. For instance, in 2013 the total number of migrants going for overseas jobs was 441,301. This was a 36 percent decline compared to the numbers in 2012, which were 691,402. The government has been unable to resolve the problems related to the legal status of Bangladeshi migrant workers Saudi Arabia, UAE and Kuwait. As a result of which less migrants are now going abroad and more are coming back to the country, leading to a decline in remittances.
Another reason due to a fall in remittance could be the appreciation of taka against the US dollar in 2013. When taka appreciates, this means that less taka is now obtained against dollar conversions. Conversely, when taka is devalued, remittances can increase as more taka is attained against converting a dollar. Appreciation can actually increase the taka prices of assets in the country, to a migrant worker. Higher taka prices of assets can discourage each worker to send in more remittances, as a result of which remittances fall. Recede in remittance can also be due to a fall in wages of workers who are residing illegally in GCC countries.
Since remittance is an important contributor to Gross National Income (GNI), it is necessary to try to find ways to overcome the barriers and increase it. One way is through higher education and training of workers. Though the benefits of higher education and training can entail a time lag, the advantage in the long-run is substantial.
The writer is the head of research at The Daily Star and can be reached at email@example.com