Earning remittance senders' trust

FE Team | Published: September 03, 2024 21:39:03

Remittance, the second biggest source of Bangladesh's foreign currency earning after exports, the expatriate workers send home may vary in amounts from time to time. The variation depends on multiple factors. Last month, for instance, the homebound remittance recorded a 39 per cent rise in comparison to what it was in August 2023 at US$2.22 billion. An immediate explanation for this surge in remittance receipt may be the change in government following the ouster of thes former government. Notably, in July last, when the deposed Hasina government was still in power and, in a bid to suppress the student movement, shut down broadband internet service for five consecutive days, the homebound remittance flow took a jolt as it recorded a receipt of 10 months' low at US$1.90 billion. Also, the mobile internet service was shut off for 10 days in a row.
To make matters worse, the banks also remained closed between July 19 and July 23. No doubt, disruption of the internet service and bank closure played a part in reduced receipt of remittance from overseas migrant workers. But there were also reports that the expatriate workers as a show of solidarity with the agitating students stopped sending remittance. Whatever the case may be, the surge in remittance inflow is indeed a good augury for the incumbent interim government of Dr Yunus. With the remittance flow looking up, this may be considered a sign of the expatriate workers' confidence in the new interim government.
Political changes apart, there are also other issues that might have factored in this welcome boost to the homeward remittance flow. The measure that the Bangladesh Bank (BB), adopted shortly after the interim government's taking office did also contribute to increased remittance flow. This included the BB's raising the price of USD by 2.5 per cent with the result that the greenback's value increased by Tk 3.0 to Tk120. Obviously, this higher exchange rate did encourage remitters to send more money through the official channel instead of hundi. It is worth noting here that on May 8 last, the BB withdrew the then-prevailing fixed exchange rate regime and introduced the so-called crawling peg system for buying and selling US dollars on the spot market in Bangladesh Taka (BDT) and set the mid-rate at Tk117 for every USD. However, under the changed political circumstances last month, commercial banks, both state-owned and private, received their shares of remittance dollars in varied amounts that in some cases reflected the remitters' outlook towards the recipient banks in question. Six private banks owned by the notorious S. Alam group, for instance, reportedly, recorded 85 per cent drop in the receipt of remittance money. Most state-owned banks, on the other hand, reported an impressive growth in remittance receipts last month.
Overall, these developments have definitely come as a relief for the economy, particularly at a time when the country's foreign exchange reserve has been under strain. Now the latest BB data released on Sunday last show that the country's forex reserves recorded a rise by US$110 million from US$20.49 billion to US$20.60 billion within a span of four weeks between July 31 August 28. Admittedly, this is a significant development given that in May last the forex reserves fell to US$18.72 billion. However, remittance inflow is prone to fluctuations, so it would be prudent to observe the trend for some time to reach a firm conclusion. Meanwhile, the interim government would do well to improve service for the expatriate workers at the embassies in host countries and the airports at home. That would help build their trust in the present government.