Pandemic was supposed to quash remittance. But inflows hit an all-time high.
In recent years, remittance has become a pillar of strength for the Bangladesh economy. So when the global coronavirus pandemic hit, all eyes were on the remittance and whether its incredible momentum would sustain.
It was widely expected that the inflows from the 1.20 crore-odd migrant workers would drop off massively. But, in reality, the inflows seem to be swimming against the tide.
Remittance hit an all-time high of $18.20 billion in the just-concluded fiscal year, giving much-needed breathing space to the government to manage the macroeconomic state of affairs hit hard by the ongoing financial whiplash.
The inflows were 10.87 per cent higher than in fiscal 2018-19, according to data from the central bank.Expatriate Bangladeshis sent home $1.83 billion in June, the highest in a single month, eclipsing the $1.74 billion that flowed in May last year.
The healthy flow of remittance pushed foreign exchange reserves to surpass the $36-billion mark for the first time on June 30.
And what caused such remarkable performance seems to have left economists and analysts scratching their heads.
"There was no good reason for the sudden increase in remittance in June as the economies of the Middle East, home to a major portion of Bangladeshi expatriates, are still suffering from the meltdown," said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
Saudi Arabia has adopted austerity measures to manage the budget deficit amid a heavy fall in petroleum prices, he said.
Many state-backed projects in the Gulf nation have come to a halt due to the fund shortage. And the country has cut salaries of the employees working in the public sector.
The price of petroleum products in the global market increased last month from April, but the hike is not good enough to cause a quick rebound in the Gulf economies, he said.
Mansur apprehended that Bangladeshi workers were now sending their last savings before leaving their host countries for good.
"The Gulf nations have launched a drive to send back illegal foreign workers. And they are now sending their deposits to families in advance," said Mansur, also a former high official of the International Monetary Fund.
About 8-10 lakh Bangladeshi expatriates are waiting to come back to the country, he said.
However, Bangladeshi expatriates may still survive the onslaught of the pandemic-induced slowdown.
They may face fewer job cuts compared with their peers from other countries. And as they are lowly paid, they may be able to survive, Mansur said.
Zahid Hussain, a former lead economist of the World Bank's Dhaka office, echoed Mansur, saying expatriates might be sending money just before leaving their host nations.
The economies of both the Middle East and Europe have recently opened and this might have pushed the remittance up.
The Gulf economies are rebounding, which has played a role in boosting the remittance flow, he added.
The 2 per cent incentive for the remitters since the initial period of last fiscal year has had a good impact on remittance flow, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.
The repatriation of workers has had a positive effect on remittance for the time being.
"We need 2-3 months more to say whether the inflow will continue in the months to come," said Rahman, also a former chairman of the Association of Bankers, Bangladesh, a forum of the CEO of private banks.
The upward trend of remittance boosted the country's foreign exchange reserve to a great extent last month.
In May, the reserves ballooned to $34 billion before swelling up to $36 billion, also aided by lower-than-expected imports.
"We have never seen such a growing trend of the reserve in a month. This is quite good given the ongoing recession," said a Bangladesh Bank official.
Lower imports and soft loans provided by the multilateral lenders have helped widen the reserve.
The Asian Development Bank approved an additional $500 million loan to strengthen the Bangladesh government's efforts to manage the impact of the coronavirus pandemic on the country's economy and public health.
The International Monetary Fund (IMF) sanctioned $732 million and the World Bank $1.05 billion.
The central bank is also buying dollars from banks amid a decline in imports, helping the BB to augment the reserves.
The BB purchased $50 million on June 30 to inject the local currency.
This will help banks enjoy adequate liquidity during the meltdown, Mansur said.
The rising remittance trend might not last in the coming days if a recent projection of the IMF comes true.
Continued remittance weakness in the coming months will lead to a 7 per cent fall in fiscal 2020-21, it said.
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