Remittance continued its upward trend last month, with migrant workers sending home 3 per cent more than they did a year earlier, in what can be viewed as the perfect foil to the sliding exports, the other source of foreign exchange for the government.
Export earnings fell 5.84 per cent year-on-year to $19.3 billion in the first six months of the fiscal year, according to data from the Export Promotion Bureau.
In January, expatriate Bangladeshis sent home $1.63 billion to take the total thus far in the fiscal year to $11.04 billion.
The seven-month receipts are up 21.43 per cent year-on-year, according to data from the Bangladesh Bank.
If the trend continues, remittance will hit a benchmark of $20 billion come the end of the fiscal year, said senior bank officials.
The government’s move to provide a 2 per cent cash subsidy for remitters from fiscal 2019-20 was the main reason for the spike, they said, adding that many banks are giving their all-out effort to bring in more remittance through the official channels.
“The favourable exchange rate of taka against the dollar and a strong stance taken by the central bank to fight illegal money transfers have also had a positive impact on remittance,” said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.
On February 2, the inter-bank exchange rate stood at Tk 84.90, up 1.10 per cent from a year earlier, according to data from the central bank.
He went on to express hope that the deficit in the current account of the balance of payment (BoP) will further narrow because of the upward trend of remittance.
But the upward trend of remittance may face slight hiccups in the months ahead when banks will implement the 6 per cent interest on deposit and 9 per cent on lending.
“A good portion of remittance is usually kept in the form of fixed deposits at local banks. So, remitters may be discouraged from sending money to the country,” said Rahman, also the immediate past chairman of the Association of Bankers, Bangladesh, a forum of banks’ managing directors.
Depositors will not get much benefit from the 6 per cent interest rate given the inflation and service charge imposed by lenders.
Banks located in many foreign countries do not give any interest to depositors; rather, savers have to pay to lenders against their deposited amount, Rahman added.
Faruq Mainuddin Ahmed, managing director of Trust Bank, echoed the same about the headwinds on remittance thanks to the the 6 per cent interest rate on deposits.
The massive expansion of mobile financial services and agent banking have also helped encourage the remitters to send their hard-earned money through the formal channel, said another official of a bank.
Through the channel, the near and dear ones of remitters can receive the funds within the shortest amount of time, he added.