Alarm bell sounded about falling inward remittance

The inward remittance figures are in for the month of November as the year draws to a close. The picture is far from rosy, and the data point to a monthly fall of 2.4 per cent in remittance from October the previous month. That percentage point represents a loss of earnings for the national coffers to the tune of US$0.05 billion. Though marginal, the decline in foreign exchange earnings on account of inward remittance adds to the worries of the government now facing a persistent shortage of the greenback.
Bankers state that the government had been sweetening the deal for the main senders of remittance by providing financial incentives. That the national currency Bangladesh Taka had depreciated considerably against the greenback had also helped boost inward flow of much-needed foreign exchange. Overall, the latest data come as a blow as it is in sharp contrast to a five-month long spell when remittances had been rebounding steadily. Experts have varying opinions on the matter. As stated by a former lead economist at the World Bank Bangladesh Dr. Zahid Hussain, "There are volatilities in the earnings in November. The first 10 days' November inflow was nearly $800 million as authorities allowed free incentives then to attract remittances, but later they withdrew it." Withdrawal of free incentives comes at a bad time, especially since the moves were working. One may contend that the money that had been provided was unsustainable and had to be withdrawn. However, in times of serious economic turbulence such measures are necessary and time will tell whether this reversal in policy has done more to reverse the gains of increased inflow of remittance or not.
Many banks had unofficially been providing far higher rates of exchange than what the central bank had advised. There is good reason for this because the Bangladesh Bank's (BB) policies had not been particularly successful in this area and banks need their supply of foreign exchange to conduct business smoothly; as BB has been hamstrung by restrictions on the volume of foreign exchange to be sold to maintain the foreign reserve threshold.
Indeed, media reports that some financial institutions have gone as far as offering Tk5.0 - Tk6.0 per dollar, over and above the rates fixed by the Bangladesh Foreign Exchange Dealers Association (BAFEDA) and the Association of Bankers Bangladesh (ABB), in a desperate bid to net as much greenback as possible to meet the persistent dearth of foreign exchange needed to conduct import business through opening of letters of credit (which forms the core of a bank's income). Banks should be given a free hand on how much they can afford to pay for these dollars as a short-term measure to keep things moving in the right direction. No import-dependent economy can sustain growth if the financial sector is hamstrung by interventions that sap its ability to conduct business.
Lastly, the issue of wholesale capital flight from the country prior to any national election is another reason why Hundi operators have been vying for those dollars. Since the authorities failed to come up with measures to criminalise and apprehend major players in the business, and not maintain incentives to meet the challenge posed by unofficial banking channels, it will become very difficult to maintain the rate of inward remittance. Keeping in place archaic measures that prohibit the transfer of financial capital outward legally has been the greatest boon for hundi operators and something needs to change on that front if the government is serious about addressing the current fiasco.

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