Remittance marks a significant rebound as Bangladesh received US$2.1 billion in January and total $12.9 billion in seven months of the current fiscal, but to no respite for the country's forex reserves.
The country's foreign-exchange reserves had fallen further by over US$ 2.0 billion in the past one month, according to latest official data.
Officials and market analysts say the continuous feeding of the greenback to the forex-hungry banks to meet their overseas payment obligations from the central bank-managed reserves results in the depletion of the country's entire stock of foreign currencies.
According to the statistics with Bangladesh Bank (BB), Bangladeshi people doing overseas jobs sent home US$2.10 billion in the just-past month of January-rated the highest since June last when the monthly volume of remittance was recorded $2.20 billion.
Compared to December's count of $1.90 billion in 2023, the country saw an increase of more than $112 million in January.
But the BB-calculated gross forex-reserves figure belies the remittance rise as the reserves dropped to $ 25.09 billion at the end of January from $27.13 billion recorded a month ago. In terms of IMF's BPM6 arithmetic, however, the gross reserves plummeted to $19.94 billion in January from December's $21.87 billion.
Officials at the BB hailed the recent rise in remittance inflow, saying that it would give some sorts of respite to the country's forex stock.
Seeking anonymity, a BB official said the monthly inflow of remittance crossed $2.0-billion market after seven months, which is a "great sign for the economy" that has been passing through a stress time due to various internal and external factors, including forex dearth.
The central banker sees the rise in the remittance inflow as "a kind of indication that the trust of remitters in the economy, after the national elections, started growing again".
There is a segment of remitters who used to keep their hard-earned money in hand to get more returns assuming that the exchange rate keeps rising, but the rate in recent times declined twice and it probably prompted them to release their money back home.
Asked about the depleting forex reserves amid the higher remittance inflows, the central banker said the BB last month cleared ACU (Asian Clearing Union) payments amounting to $1.27 billion which impacted the reserves.
At the same time, he notes, the central bank continues selling a good amount of US dollars to the forex-starved commercial banks to meet their overseas payments in January as well.
"These are the reasons behind the fall in the reserves. But there is nothing to worry as ups and downs in reserves is normal," the BB official says.
According to the BB data, the central bank sold more than $1.0 billion in January 2024.
Chief executive officer and managing director of Brac Bank Selim RF Hossain says remitters' trust started increasing as the economy started stabilising after last month's parliamentary election, which is a "good sign".
"But one-month data is not enough to understand the trend. We need to see at least three to four months' data to have an insight about the situation," says Mr Hussain, also chairman of the
Association of Bankers Bangladesh (ABB), an association of chief executives of the country's commercial banks.
Alongside the fact of exchange-rate dynamics, says managing director and CEO of Dhaka Bank Limited Emranul Huq, the demand side of the forex is also on the downturn. "As the demand falls, the remitters are now sending more remittance through the banking channel."
The experienced banker notes that Bangladesh normally observes comparatively more social gatherings, including marriage functions, in the winter season which basically starts from the month of December.
"If we look around us in this season, we will find such functions almost everywhere now. Many remitters, especially in the rural areas, send more money on that purpose for their families. I think it could be another reason behind the surge in inward remittance," says Mr. Huq.
Former lead economist of World Bank's Dhaka office Dr Zahid Hussain also takes the growing inflow of remittance as a good sign for the economy, but poses the question whether it is enough for a rebound from the crisis-driven belt-tightening.
The country managed to save around $4.0 billion through demand contraction of imports as part of its belt-tightening move but the financial account in the balance of payments (BoP) keeps widening fast.
"And, the rise in remittance is a very small portion compared to the magnitude of the forex shortfall. So, we need to increase the supply of the greenback to a large extend," the noted economist suggests.
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