Remittance: the only bright spot
Remittance kept up its strong growth momentum last month as migrant workers sent home 10.16 per cent more than they did a year earlier, in a major boost to the economy under stress from sliding exports.
Exports fell 5.21 per cent year-on-year to $22.92 billion in the first seven months of the fiscal year, according to data from the Export Promotion Bureau.
In February, expatriate Bangladeshis sent home $1.45 billion to take the tally to $12.49 billion so far in fiscal 2019-20. The eight-month receipts were up 20.05 per cent year-on-year, according to data from the Bangladesh Bank.
The 2 per cent cash subsidy for remitters from this fiscal year has been the main driver behind the spike, according to economists and BB officials.
If the trend continues, remittance will hit a milestone of $20 billion come the end of the fiscal year, said BB officials. Some $16.4 billion flew in to the country last fiscal year.
"Remittance has become the lifeline of the economy given the frustrating performance of all other economic indicators," said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
The country's balance of payment would have faced severe crisis if remittance had failed to maintain the upward trend.
The current account deficit contracted 60 per cent year-on-year to $1.34 billion in the first half of the fiscal year. The overall balance, another major component of the balance of payment, stood at $27 million during the period. A year earlier, it was $513 million in the deficit.
Besides, the foreign exchange reserve is at a comfortable level thanks to the strong growth of remittance, said Mansur, also a former economist of the International Monetary Fund.
"The favourable exchange rate of the taka against the US dollar and a strong stance taken by the central bank against illegal money transfers have had a positive impact on remittance," said Md Arfan Ali, managing director of Bank Asia.
On March 1, the inter-bank exchange rate stood at Tk 84.95 per dollar, up nearly 1 per cent from a year earlier, BB data showed.
Banks have recently improved their skills to mobilise remittance in order to tackle the shortage of foreign exchanges, Ali said.
The expanding remittance flow has had a good impact on GDP growth as well, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.
"This has increased the spending power of the near and dear ones of remitters."
The country's rural economy has been in good shape in recent years thanks to the robust flow of remittance, said Rahman, also an immediate past chairman of the Association of Bankers, Bangladesh, a forum of managing directors of banks.
The strong growth in the flow of remittance will fuel domestic demand, said the finance ministry recently.
Bangladesh's current account deficit is in a good shape compared with the previous two fiscal years thanks to increased remittance flow, it said.
But Mansur went on to express fears that remittance may decline in the coming months as the price of petroleum products has sharply fallen in the international market in the wake of the coronavirus outbreak.
Moreover, workers going abroad have been declining for the last two years, in an alarming sign for the economy.
"The government should explore avenues to maintain the upward trend of remittance by sidestepping the recent spates of global crisis," Mansur said.
The majority of the banks now use application protocol interface (API) to bring remittance on a real-time basis, encouraging remitters to send their hard-earned money through the banking channel, Ali said.
An API is a set of digital programming code that enables data transmission between software products. It also contains the terms of data exchange.
The software has become an important part of today's banking system as lenders use data in order to perform several functions, including sending remittance from one bank to another.