Remittance was cruising; COVID-19 popped up and made it swerve

When China sneezes, the world catches a cold, it is often said.

And Bangladesh, which has so far been immune from the China-originating coronavirus that is tearing through the globe since January, has started to feel the cold: remittance, one of the lifelines for the economy, has started to feel the twitch.

Of the top 30 remittance sending countries, inflows from 19 have contracted in the first two months of the year, according to data from the central bank.

In January, remittance inflows stood at $1.63 billion, down 3.14 per cent from a month earlier. The figure also decreased 11.36 per cent to $1.45 billion in February.

And in the days ahead, it will drop off even more, given the fact that the virus is bringing the global economy down to its knees, experts said.

Although Covid-19 has now spread over to Europe and America, the Gulf countries, which play host to a large population of Bangladesh's migrant workers, are facing economic setback too due to lower demand of petroleum, said Ahsan H Mansur, executive director of the Policy Research Institute.

"This means, remittance from the Middle East will also decline, which will hit the rural economy," he added. 

Remittance from Saudi Arabia and the UAE, the top two sources of remittance for Bangladesh, decreased in January and February.

Non-resident Bangladeshis in Saudi Arabia sent home $321 million and $308 million in January and February respectively. In December last year, they remitted $335.73 million.

The UAE also showed the same worrisome trend: $213 million in January and $192 million in February came from that country, in contrast to $235 million in December.

Remittance from Japan, which was also struck by the lethal virus, also registered a declining figure $3.04 million came in February and $3.92 million in January, down from $5.53 million in December last year.

Italy, one major remittance source for Bangladesh and is currently on lockdown, sent in frustrating sums in the last two months.

Remittance from the European country stood at $57 million in February, $73 million in January, but the figure was $83 million in December.

The government started to provide 2 per cent cash subsidy for remitters from this fiscal year to give a boost to remittance with a view to tackling the foreign exchange crisis.

Subsequently, remittance hit an all-time high of $18.32 billion last year riding on the incentive.      

But Mansur said the 2 per cent cash subsidy will not work now as the host countries are now staring at significant economic slowdown for the coronavirus pandemic.  

The countries affected by the virus will have to take a long time to revive their economy after getting rid of the virus, he said.

"The rural economy will be hit hard by the global financial crisis as the spending capacity of a large number of villagers depend on remittance," said Mansur, also a former official of the International Monetary Fund.

He, however, said Bangladesh will not face a major crisis in managing its balance of payments as the price of oil is decreasing because of the sluggish global economy.

But the Bangladeshi workers of the Middle East may lose their jobs as the Gulf economies are largely reliant on their petroleum exports, said Mansur, a former economist of the International Monetary Fund.

Those who send home money amongst the Bangladeshi diaspora are mostly engaged with small businesses such as fast food shops and grocery stores, said Zahid Hussain, a former lead economist of the World Bank's Dhaka office.

"But a large number of people in those nations have been quarantined, so small businesses there have been shut. So, their income sources have been affected."

Many large companies have also been forced to suspend production, forcing the workers to leave their job, he said.

"Against the backdrop, remittance will decrease more in the coming days."

Many countries have already imposed restrictions on international travel, putting an adverse impact on global the economy.

"We do not know when the situation will stabilise. So, the country does not have any option to push up remittance right now."

Given the rainy days, the non-resident Bangladeshis are keeping their hard-earned money.

"They won't be remitting their funds back to Bangladesh as they would need the sums for their own survival," Hussain added.

A good number of non-resident Bangladeshis have been compelled to return to their home country because of the outbreak, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.

"Remittance, which is the only one positive indicator in our economy, has now started to feel the pinch. This is highly frustrating."

The situation may get worse in the coming days, but there is no remedy right now to tackle the state of affairs, said Rahman, also the immediate past chairman of the Association of Bankers, Bangladesh, a forum of managing directors of banks.

The lower remittance will not hit the banking sector immediately given the declining trend of import, he said, adding that problem will be created once imports pick up.

The government should increase the 2 percent cash incentive on a short-term basis to help the remittance receivers, said Md Arfan Ali, managing director of Bank Asia.

According to Bangladesh's Wage Earners' Welfare Board, there are some 1.20 crore Bangladeshis working across the globe.